July 31, 2012


East Russia's wheat prices up due to poor harvest



Russia's eastern regions' concern over poor harvest yields pushed wheat prices higher, adding to speculation that the government may be forced to sell a part of its stock.


Russia is ready to sell some grain via state interventions, agriculture minister Nikolai Fyodorov said last week but did not specify when the intervention could take place. From April-June Russia sold about two million tonnes of grain in state interventions and still has about five million tonnes in its stock.


Wheat prices rose in Siberia, Urals and Volga regions despite stable prices in key export South regions thanks to strong demand from local clients and buyers from other regions, the SovEcon consultancy said in a note.


"A significant shortage of crop becomes more evident in Volga region, which is harvesting the new crop now," SovEcon said. "Urals and Siberia will start to harvest later, but it is difficult to expect a high crop there."


Russia's southern breadbasket regions saw persistent rains after spring drought but weather remained dry in Siberia and Volga region, raising fears of possible disruptions in the country's grain export.


The pace of Russia's grain exports in 2012-13 season still lags the previous year. In the first three weeks of July, Russia exported 1.13 million tonnes of grains, including 975,000 tonnes of wheat, Dmitry Rylko, head of the Institute for Agricultural Market Studies (IKAR), said in a note.


Russia exported 1.66 million tonnes of grains and 1.30 million tonnes of wheat in the first three weeks of July last year. Wheat with 12.5% protein content was stable at US$310 per tonne in Russia's main deep-water ports last week, IKAR added. Barley feed prices in deep-water ports fell US$5 to US$295 per tonne last week.


SovEcon saw prices for fourth grade milling wheat in deep-water ports stable last week at RUB9,200-9,400 (US$286-292) per tonne on a carriage-paid-to (CPT) basis. Russia's wheat prices in shallow-water ports increased to RUB8,700-8,800 (US$270-273) per tonne last week from RUB8,500-8,600 (US$264-267), SovEcon said.


European milling wheat futures rose sharply in opening trade on Monday (July 30), tracking Chicago grain prices, as weather forecasts and crop surveys raised fears of more damage to US crops.


Benchmark November milling wheat was up EUR7.50 (US$9.2) or 2.91% at EUR265.25 (US$326) a tonne by 0852 GMT, after rising as high as EUR265.75 (US$326.5) in opening deals.


Russia has harvested grain and legumes from 24.1% of the total target area, bringing in 24.8 million tonnes compared to 25.3 million tonnes a year earlier, according to Russia's Agriculture Ministry harvest data as of July 26. In particular, as of July 26 the wheat harvest rose to 19.4 million tonnes compared to 17.5 million tonnes a year earlier with yields at 2.46 tonnes per hectare.


Russia's Agriculture Ministry's official estimate of 2012 grains crop stands at 80-85 million tonnes. The Russian state weather forecaster cut its 2012 grain crop outlook, including legumes, to 77-80 million tonnes last week.


For sunseeds, SovEcon said export prices for crude sunoil were stable at US$1,150 per tonne free-on-board (FOB) at the Black Sea port of Novorossiisk, while prices inland rose RUB750 (US$23) to RUB38,575 (US$1,198) per tonne.


New crop rapeseeds prices were up at US$530 per tonne from US$514 per tonne, IKAR said. SovEcon pegged it at RUB15,500-16,500 (US$480-510) per tonne.

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