August 16, 2010

Russian supply shortage prompts plans for corn imports

Panic-stricken Russian corn consumers are planning imports, while Egypt is aggressively buying up wheat, reports said, as the fallout of the poor former Soviet Union crop continued its upheaval of the grain trade.

Many Russian livestock farmers are "in a panic and fearful of the situation" because of waning feed supplies, Alex Kholopov, an adviser to the US Grains Council (USGC) said.

The squeeze reflects a reluctance by grain growers to sell down stocks, hoping that prices elevated by the country's worst drought on record would get even higher, and despite the export ban which has cut off their access to foreign buyers.

Russia, which is attempting to ramp up its livestock industry, has also unveiled plans to release grain from state stockpiles.

The statement followed a revision to USDA estimates which quadrupled to 650,000 tonnes the department's estimate for Russian wheat imports in 2010-11, and to 700,000 tonnes the forecast for purchases of foreign coarse grains.

And it came as a report from the USDA's bureau in Cairo flagged the rush by Egypt, the biggest wheat importer, to buy up supplies, despite prices some 50% higher than two months ago.

Private sector buyers, which import some 3-4 million tonnes of wheat a year, were likely to feel the major impact of the ban on Russian exports, on which Egypt has increasingly relied.

They typically hold only one-month's stock, and have "already started to buy from other countries", notably the US, snapping up 300,000-400,000 tonnes of wheat in the last two-to-three weeks.

The state grain buyer, the General Authority for Supply Commodities (GASC), has deeper reserves, of 4-5 million tonnes, sufficient to last about four-to-five months, the bureau said, adding that Egypt's food security had not been jeopardised by the Russian export ban.

Nonetheless, the authority was "moving aggressively" to replace 540,000 tonnes of Russian supplies cancelled by the export ban. The government was considering an increase of up to US$700 million in the budget for purchasing wheat in 2010-11.

The cut-off of Russian wheat exports, and the difficulty some merchants are having in finding grain at prices they contracted before the rally, continued to reverberate through the grain trade on Friday (Aug 13).

A European supplier was reported to have cancelled the shipment of 80,000 tonnes of Black Sea wheat to Bangladesh.

Meanwhile, on the markets, prices closed weaker in Chicago, down 0.7% at US$7.02 ½ a bushel for September delivery, on trading volumes which were, at 40,000 lots, the lowest for more than two weeks.

Paris wheat for November added 0.7% to E214.50 a tonne, helped by a weaker euro, while London November feed wheat closed 1.5% higher at GBP155.00 a tonne, with the additional benefit of data showing lower sowings than had been thought.