August 19, 2008

Russian feed grain prices have been declining on a large crop but the drop would likely be staunched soon, analysts said.

As feed grain prices in some regions have already fallen below those set by the government, the start of government purchases on Tuesday may support feed grain prices.

The Institute for Agricultural Market Studies (IKAR) said feed wheat declined by US$10 to US$172, ex-silo in the south of Russia.

The domestic feed barley price also declined to US$151, it said.

Meanwhile, prices of milling wheat have been climbing due to high demand from exporters fulfilling urgent contracts, and from domestic flour mills, which are replenishing their stocks, SovEcon said.

However, the rise of the fourth-grade wheat prices would be limited due to strong competition, it said.

Third-grade wheat prospects appear to be much better, as FOB export prices for US Hard Red Winter wheat, which is the closest competitor to Russian third-grade, are some US$80 higher than those of Soft Red Winter wheat, which competes with fourth-grade wheat.

The difference between the prices of the two Russian cereals is US$29-$37, SovEcon said.

IKAR estimated grain exports last week at 430,000 tonnes, which means that Russia had exported almost 1.5 million tonnes since the start of the 2008/09 season in July.