January 25, 2012

 

 

With Russia's strong shipment pace threatening to trigger a government cut-off and the drought in Argentina, fears of export bans by the two countries have returned to grain markets.

 

The threat of a Russian ban, thanks to the strong pace of exports, was highlighted on both sides of the Atlantic.

 

In the UK, grain traders at a major commodities house, with a strong Black Sea presence, noted "talk that Russia could impose an export tax before the end of the season [in June] to stem the flow of wheat", so shifting import orders to other exporting countries.

 

In the US, speculation was of a ban being imposed in March or April, when exports may have reached the 23-25 million-tonne threshold at which Russian leaders have pledged to impose curbs to protect domestic supplies.

 

Separately, rumours kicked off that Argentina may also curb exports after drought damage to its corn and soy crops, which have prompted a series of downgrades to estimates for the crops.

 

On Tuesday (Jan 24), Oil World, for a second successive week, cut its forecast for the Argentine soy crop, this time by 1.5 million tonnes to 48.5 million tonnes, taking an improvement from last season's 49.2 million-tonne crop off the agenda.

 

The UN food agency, the Food and Agriculture Organization forecast an Argentine corn harvest of 21.4 million tonnes, well below the latest estimate of 26 million tonnes from the USDA, and last year's harvest of some 29 million tonnes.

 

The downgrades followed a cut by Argentina's farm ministry of seven million tonnes, to 23 million tonnes, in its estimate for the corn harvest, and to 48.9 million tonnes, from 52-53 million tonnes, in the soy crop.

 

Rumours of a ban "are out there", said Don Roose, president of US Commodities.

 

Argentina has a history of strong controls over crop exports. However, farm minister Lorenzo Basso said on Tuesday that talk of curbs was unsubstantiated.

 

And Roose signalled that, however disappointing Argentina's harvests may prove, the maths did not stack up for shipment bans.

 

In corn, for instance, even a harvest of 23 million tonnes would sufficient to cover demand, of about 7.5 million tonnes, with ease.

 

"By any stretch, they still have a lot of capacity to export," he said.

 

Furthermore, the country reaps considerable tax revenue from grain shipments, meaning that for Argentina to ban exports "would be to shoot itself in the foot".

 

The rumours succeeded in ensuring a positive finish for Chicago crop futures, which had fallen earlier after overnight rains in Argentina proved more generous than had been expecting, so improving prospects, in particular, for soy.

 

Soy's later cycle than corn gives them more scope for recovery, should rains persist.

 

Soy for March closed up 0.2% at $12.20 a bushel, while March corn ended 1.9% higher at US$163.50 a tonne.

 

March wheat finished up 2.2% at US$6.33 a bushel, with the grain adding 1.9% in Kansas to US$6.86 a bushel.