August 15, 2013

Russia's wheat prices jump as poor weather slows harvest

Buoyed by healthy demand from foreign importers and poor weather slowing the country's harvesting campaign, Russia's wheat export prices rose last week.

Russia, one of the world's leading wheat exporters, had harvested 33.4 million tonnes of wheat from 44% of its planted area as of Monday (Aug 12). It hopes to increase the crop by one third to at least 50 million tonnes after last year's drought.

Russian prices for wheat supplies with 12.5% protein content strengthened slightly to US$254/tonne in the Black Sea on a free-on-board (FOB) basis at the end of last week, the Institute for Agricultural Market Studies (IKAR) said in a note.

SovEcon agriculture analysts said prices for wheat with 11.5% protein content had risen around US$3 to US$249-253/tonne in deep-water ports. An improvement in domestic prices could pose a problem for Russian exporters with French grain looking increasingly competitive, SovEcon added.

"The competition between Black Sea exporters and French wheat is escalating. Against the background of harvest delays, a limited supply of quality wheat and the rise in domestic prices... Russian exporters are now in a difficult situation," SovEcon analysts said in note.

Russia's 2013 grain output will be lower than previously estimated, IKAR said, predicting production of 89.7 million tonnes, down from 91.7 million tonnes, including wheat output of 51.8 million tonnes.

On the rapeseed market, flagging demand has pushed offer prices down to RUB10,000-10,500 (US$300-320) per tonne from RUB10,400-10,800 (US$315-327) per tonne on excluding works (EXW) in the North Caucasus region, according to SovEcon.

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