July 5, 2012


Russia's wheat prices up due to US drought



Due to the drought in the US and Latin America, prices for Russian fourth-grade milling wheat skyrocketed.


Prices rose to a historic RUB8,900 (US$276) from RUB7,075 (US$219) a tonne a week ago in the Black sea ports according to the Institute for Agricultural Market Studies (IKAR).


This is the first price hike since the 2010 drought in Russia when the government was forced to impose an export embargo to prevent home market prices from rising. The embargo was lifted in 2011.


Global wheat and corn prices also jumped nearly 30% mainly due to a drought in the US and parts of Latin America. According to the USDA, about 22% of the wheat crop has suffered and less than 50% remained intact.


"Another reason for the price hike is the drought in parts of Rostov and Krasnodar regions in Southern Russia that forced the Agriculture Ministry to cut its 2012 harvest forecast to 86.5 million tonnes from an earlier estimate of 94 million tonnes",  said Dmitry Rylko, General Director of IKAR.


Russia's grain stocks fell to 16.8 million tonnes on June 1 from 22 million tonnes on May 1, according to the State Statistics Service data.


Russia, the world's second wheat exporter after the US, plans to export between 13.5 million-13.8 million tonnes of wheat for the season 2012-13. That's compared with an estimated 21 million tonnes in 2011-12, according to IKAR. The main importers are Middle East and North African countries. Russia may even consider imposing another grain export ban if price rises continue.


"I hope this doesn't happen" says Dmitry Rylko. "It's still too early to say. Things can change for the better."


Meanwhile exporters have slowed down their business, waiting for a wider margin between international and domestic prices.

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