May 19, 2012

 

Russia raises grain export worries

 

 

The grain exports of Russia is likely to drop by more than one-quarter in the upcoming season, a deeper slump than projection in a benchmark US report, partly due to the worsened crops estimates in the south, SovEcon said.

 

The influential analysis group pegged Russia's grain shipments, which mainly comprise wheat, in 2012-13 at 20 million tonnes, a drop of 28% on its estimate for the current - unusually strong - season.

 

The USDA last week pegged the decline in Russian grain exports at 19%, to 20.8m tonnes.

 

SovEcon said that its forecast reflected in part a dearth in unsold inventories in areas close to port expected at the end of 2011-12, following the rapid pace of exports, and the closure of a railway incentive which has drawn replacement supplies from Russia's interior.

 

The end of June will bring the end of a period of discounted transport from Siberia, where stocks are relatively plentiful.

 

However, SovEcon also flagged the impact of "unfavourable weather" in southern regions, from which exports are largely drawn, and which has attracted increasing market attention, given the spur to global wheat prices which the first warnings in June 2010 over Russia's last drought gave to prices.

 

Russia is typically seen as a supplier of ample supplies of competitively priced wheat.

 

Separately, Macquarie analysts said that Russian drought was the "biggest risk" to a forecast for lower wheat prices ahead, and nudged higher by US$0.22 to US$5.57 a bushel its forecast for the average value of Chicago wheat futures in 2012-13.

 

"The southern region is Russia's biggest winter wheat production region, and this region accounts for the majority of exports," the bank said.

 

"If rains don't return to this region shortly, a significant production loss is likely to cause a large loss to exports."

 

Indeed, on the markets, the growing fears for the crop prompted fresh grains in wheat prices, which returned above US$6.50 a bushel in Chicago taking gains so far this week to 10% - and closed up 2% in Paris.

 

At FCStone, Jaime Nolan-Miralles, noting that "temperatures remain high and precipitation low" in southern Russia, said: "Memories of yield decimation a couple of years back remain fresh in the markets mind."

 

Indeed, in an echo of 2010, official Russian forecasters have warned of a high risk of fire in rain-neglected areas.

 

Benson Quinn Commodities analyst Jonathan Watters flagged talk of "the potential for Sukhovey winds, which destroyed much of the crop in 2010".

 

The Sukhovey winds, which blow in from Asian desert areas, have a history of disrupting agricultural output in Russia and Ukraine.