September 21, 2010

Due to feed grain shortage caused by a severe drought, most Russian grain prices rose last week, led by feed grain and corn in particular.

In the European part of Russia, feed wheat added 100 roubles (US$3.22) to 5,275 roubles (US$170.22) per tonne EXW, feed barley rose by 125 roubles (US$4.03) to 5,725 roubles (US$184.74) and corn by 350 roubles (US$11.29) to 6,550 roubles (US$211.33) per tonne.

Third-grade milling wheat prices rose by 100 roubles (US$) per tonne to 5,850 roubles (US$) per tonne and fourth-grade wheat prices were practically unchanged from the previous week.

Market activity remained high in many regions. Traders in North Caucasus reported an increase in demand primarily from buyers in other regions.

The market in Siberia, where the harvesting had started, was also active. Supply was high and the volume of purchases was big, but prices remained rather stable. Demand for feed grain was high from buyers in central Russia.

Traders also reported lower demand from local millers for milling wheat. This may indicate that either mills had already replenished their stocks, or they are waiting for a decline of prices due to increased supply from North Caucasus and Siberia.

Supply may increase as the government has ordered lowering railway fees for transporting grains and flour to the regions on the Volga, in the northwest and in the centre of European Russia from September 20 to December 31.

SovEcon believes that holders of grain stocks in the south of Russia will benefit most from the order. SovEcon expects the lower tariff to support prices in North Caucasus and to push them down in the centre.