May 18, 2010


EU-Russia grain sectors face looming price war



Russia's grain industry has raised the likelihood of a price war with Europe, revealing a determination to raise shipments at a time when the EU may act to support its own trade prospects.


The Russian Grain Union said there was "no other way out" of a trend of rising grain inventories than to raise shipments from the 21.6 million tonnes expected for 2009-10 – through low price if necessary.


"The next crop year will be a year of expansion of the Russian presence on the world grain market," Arkady Zlochevsky, the president of the Russian Grain Union, said.


The union was raising again with the Russian government a request for RUB10 billion (US$323 million) in export subsidies.


The comments come amid rising speculation that Europe may re-introduce export subsidies, following growing unease among farmers at low grain prices. The weak market prompted growers in France - which has a particularly strong agricultural lobby, and last year bowed to pressure from dairy farmers for support – to drive a convoy of tractors into Paris two weeks ago to press for state help.


The USDA said last week that it was "widely speculated that the European Commission could reintroduce export support measures under pressure from countries like France". France is the Europe's biggest wheat grower and exporter.


The USDA forecast Europe's wheat exports increasing by 2.0 million tonnes to 22.0 million tonnes in the 2010-11 marketing year, which starts on July 1, flagging also a boost to prospects from the decline of the euro, which fell on Monday to its lowest against the dollar for four years.


The USDA, making its first forecasts for 2010-11 crops, forecast that Russia's wheat exports would market time at 17.5 million tonnes.


The union stood by a forecast for Russia's grain harvest of 95-97 million tonnes, and – if the weather is benign - of potentially more than 100 million tonnes.


However, the group's forecasts for this year's crop are ahead of many other forecasters.


APK-Inform on Monday pegged the grain harvest at 94 million tonnes after accounting for higher winterkill, a slide in spring sowings and "low reserves of soil moisture in the ploughing layer in several regions".


The union's forecast of a Russian wheat crop of about 60 million tonnes compares with a USDA estimate of 58.0 million tonnes.

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