July 27, 2010


Russia grain prices surge on drought, low supply



Russian grain prices reached record levels last week on advancing drought and farmers' reluctance to sell on the rising market, which heightened competition for grain between exporters and feedmillers, according to analysts.


FOB Black Sea prices for ordinary wheat rose to over US$210 per tonne last week from US$198 a week before, the Institute for Agricultural Market Studies (IKAR) said in a weekly note.


"The rise in grain prices reached record levels last week," SovEcon agricultural analysts said in a weekly note.


Exporters raised bid prices for wheat by RUB500-RUB600 (US$16.5-US$19.8) to RUB5,700-RUB5,800 (US$188.1-US$191.4) roubles per tonne including delivery to (CPT) Novorossiisk, while in shallow water ports prices rose to RUB5,000 (US$165) per tonne from RUB4,400-4,600 (US$145.2-US$151.8).


SovEcon said that last week processors were actively trying to buy grain, while stock holders were reluctant to sell with some even declining to honour earlier signed supply contracts.


IKAR said prices in southern Russia rose by some RUB100 (US$3.3) last week to RUB5,100 (US$168.3) for third-grade milling wheat and to RUB4,900 (US$161.7)  for fourth-grade milling wheat. SovEcon said fifth-grade feed wheat led the price rally on the domestic market last week, its average price rising by RUB950 (US$31.3)  per tonne to RUB4,450 (US$147) per tonne.


Milling wheat rose by RUB600 (US$19.8) per tonne to RUB4,850 (US$160) for third-grade wheat and to RUB4,825 (US$159.2) for fourth-grade wheat, SovEcon said.


It believes that the government plans to start selling grain from its stocks may contain prices, which have already exceeded prices at which the government had bought the grain.


The Agriculture Ministry said that by July 22, drought had killed crops on 10 million hectares, without specifying losses of grain, which had been sown on 43.6 million hectares.


Farmers had harvested 25.3 million tonnes of grain by July 22, up 2.4 million from the same date a year ago. Wheat crop was 19 million tonnes, up one million tonnes from a year-ago and barley crop rose by 0.2 million tonnes to 2.7 million tonnes.


The bulk of the grain comes from regions largely unaffected by the drought.


Grain exports in the first 20 days of July exceeded one million tonnes, including 0.8 million tonnes of wheat, which is much higher than the 650,000 tonnes exported by the same time a year ago, in spite of acute competition between exporters and domestic consumers, IKAR said.

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