March 7, 2011

Russian wheat planting falls to four-year low amid export ban

Russia's ban on grain exports means that the country's farmers will plant the fewest wheat fields in four years, another sign that global prices will continue to rise.

Wheat plantings in the country, once the second-biggest exporter, will drop 2.3% to 64.2 million acres for this year's crop, according to the median in survey of producers, traders, and analysts.

Farmers cannot plant more crops because the ban imposed after last summer's drought is limiting farm income. Diesel was 30% higher than a year earlier in January and OAO Acron, Russia's third-biggest nitrogen fertiliser producer, raised some prices by more than 12 % for the first half.

The 84-million-tonne grain harvest anticipated in the survey is one million tonnes below what the government says it needs to consider lifting the seven-month-old export ban. The absence of Russian supplies comes as the US stated that global grain inventories will drop 13%, as riots in Tunisia and Egypt have toppled their leaders and governments continue to hoard food.

While Russian wheat prices are 22% cheaper than futures on CBOT, the global benchmark, First Deputy Prime Minister Viktor Zubkov said on March 2 that the export ban could be extended from July through the end of 2011.

Russian policies may mean that there will not be a reversal in the 94% rally that began in June after drought and flooding from Canada to Russia ruined crops.

Wheat will average US$8.98 a bushel in the next quarter, 7.9 % more than the US$8.3225 traded March 4. Natural disasters are cutting harvests around the world and forcing governments to forego revenue from international sales to ensure food security for their own people.