November 20, 2010

 

Russia's export woes bolster global wheat prices

Russia will likely remain a small-time grain exporter next year even if it lifts its ban on shipments, a prospect that bodes well for wheat prices in other exporting nations, analysts said.

 

Dependence by importers on other grain shippers, such as the EU and the US, is to stay "high" for now, given Russia's inability to resume its place as the world's third-largest wheat exporter.

 

"This should support wheat prices" in Europe and the US, according to analysts.

 

The comments come the day after the US unveiled its best weekly wheat exports for two months, while the EU said it had cleared 442,000 tonnes of soft wheat since the beginning of 2010-11 in July, a jump of 35% on-year.

 

Russia in August introduced a ban on wheat exports following its poor harvest, which many merchants believe will last throughout 2011.

 

Indeed, the drought that devastated Russia's harvest this summer - sending production 40% lower to 60.5 million tonnes - persisted in many areas to hamper autumn sowings, leaving the winter grain area to fall short of an initial target of 18 million hectares.

 

While many areas could be sown with spring grains instead, their lower yields will cut chances of rebuilding Russia's export surplus.

 

The Russian Grain Union said Thursday (Nov 18) that the country would need to harvest "a minimum" of 80 million tonnes of grain next year merely to cover domestic demand.

 

"If we harvest less, we will put further development of the agricultural sector under threat," said the union's president.

 

The extent to which Russia is able to revive its grains production will depend in part on the severity of the winter, which typically causes losses of 8% in autumn-sown grains.

 

While frost-nipped areas can generally be resown, the lower yields that spring grains achieve would retain the size of the crop's rebound.