September 28, 2012

 

Russia likely to reduce grain exports in 2013

 

 

Russia will not set any grain export limitations at all this year but some restrictions may be possible next year if wheat exports continue on a large scale.

 

This was according to Deputy Economy Minister Andrei Klepach on Thursday (Sep 27).

 

Klepach's comments to the Reuters Russia Investment Summit showed government officials still at odds over Moscow's grain export policy in the wake of severe drought after Deputy Prime Minister Arkady Dvorkovich categorically ruled any bans or tariffs.

 

"We do not plan any restrictions before the end of this year - this is an official position," Klepach told Reuters. "There is no plan to impose a ban or floating tariffs."

 

Hot and dry weather has decimated this year's Russian cereal harvest, slashing yields by a quarter just as the US experienced its worst harvest in more than half a century, sending global prices for wheat and corn into overdrive.

 

Adding to upward pressure on wheat prices are persistent rumours that Russia will ban grain exports this year, as it did after drought in 2010.

 

Conflicting statements by Russian officials have added to confusion. Klepach is deputy to Economy Minister Andrei Belousov, who said at the weekend that an export ban was possible.

 

But the deputy prime minister in charge of agriculture, Arkady Dvorkovich, said the Economy Ministry had no responsibility for agricultural policy and denied any restrictions were under discussion at any level.

 

"You can trust or not trust, you can ask any questions, but we will not impose any export restrictions," Dvorkovich told Reuters on Tuesday (Sep 25).

 

Russia is expected to harvest about 70 million tonnes of grain, down from last year's 94 million tonnes. The 2012-13 exportable surplus seen at 10-12 million tonnes of grains, of which about seven million tonnes have already been shipped.

 

"The problem is that the balance (of supply and demand) is quite tight, and exports could cause a significant domestic price increase after the New Year," Klepach said, saying prices at RUB8,500-9,000 (US$270-290) per tonne were already near "critical" levels.

 

"In principle this means that if global prises stop rising, the attractiveness of exports should decrease. But if global prices rise further, there could be pressure on domestic prices that would force us to make decisions," said Klepach. "But this is for the next year."

 

Klepach added that Russia's basic scenario for this year is to sell some grain from state intervention stocks.

 

Russia has roughly five million tonnes of grain in its intervention stocks, which it could use to stabilise prices on the domestic market. Russia's government agricultural commission, headed by Dvorkovich, will consider a possible start to grain sales from the state intervention stocks next week.

 

Meanwhile, Russia's wheat export prices have been rising since June due to worsening crop conditions and forecasts. Moscow is already losing market share to other global suppliers, including France, as Russia is running low on supplies for export.

 

For example, Egypt, the world's largest wheat importer, bought 300,000 tonnes of Romanian and French wheat at its snap tender this week. There were no purchases of wheat from Russia, which has been a major supplier in the past month.