July 5, 2011


Black Sea grain sales slow on falling world prices



Sales in Black Sea grain exporters, Russia and Ukraine, are slowing as a slump in international prices has dampened trade, analysts and dealers said on Monday (Jul 4).


Prices are falling in Russia even as the country opens its borders to exports after more than a year, as buyers hold out for better international prices, according to Moscow-based analyst SovEcon.


"As the international markets keep going down and buyers remain cautious, we expect domestic prices to continue declining," the analyst said in a note. "Prices of US$200 per tonne may be reached in the nearest future."


Meanwhile, farmers in Ukraine are refusing to sell their grain after a collapse in international prices and government policy has made prices less attractive, according to local traders.


Paris wheat futures have lost more than a quarter of their value from the peaks of early May as the return of Russia to world markets and improving prospects for Europe's harvest have weighed on prices.


Markets tumbled further last week after a raft of bearish data from the USDA and the International Grains Council eased concerns of a shortage of world grain supplies.


SovEcon also said many buyers in Russia have already bought enough supplies ahead of the end of the ban last Friday. Russian customs approved one million tonnes of grain for shipping abroad on the first day the country resumed grain exports, according to Deputy Prime Minister Viktor Zubkov.


One trader said eight million tonnes of excess stocks held in the country have already been contracted for export.


"The reason behind the halt is not only the downward trend on the world markets, but the fact that many traders have built sufficient stocks to cover already signed contracts," said SovEcon.


In Ukraine, government export duties on grain and a decision to stop refunding the value added tax that grain traders pay to farmers are also making prices less attractive, said the traders.


"A combination of a drop in world price, a changed VAT law to farmer's disadvantage, and introduction of export duties has caused price collapse," said one senior trader. "The farmer is a very reluctant seller at the moment."


Ukraine exported 11.95 million tonnes of grain in the 2010-11 marketing year from July to June, down from nearly 22 million tonnes in the previous marketing year, Ukraine Agrarian Confederation said on Friday (Jul 1).

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