September 14, 2011

Russia's large wheat export not enough to meet demands



Russian wheat export will increase this year, but it is not enough to meet global demand as a result of droughts from the US to Australia.


According to Bloomberg, Russian sales will gain more than fourfold to 17.9 million tonnes this year, second only to the US, the median of 16 analysts' forecasts compiled. A fourth straight year of record consumption means global stockpiles will shrink to 28.7% of demand, the smallest ratio since 2009, USDA data show. Prices will rise to 16% to US$8.50 a bushel by the end of December, according to analysts.


Russia resumed exports in July after an almost yearlong ban prompted by its worst drought in a half century. Dry conditions are hurting crops from Texas to Iowa, just as near-record corn prices spur livestock farmers to use the most wheat for feed in two decades. Grupo Bimbo SAB, the world's largest bread maker, and CSM NV, the biggest manufacturer of bakery ingredients, increased prices as grain costs rose.


"Wheat is definitely a bullish market," said a fund manager at Diapason Commodities Management in Lausanne, Switzerland, which has about nine billion invested in raw materials, said by telephone on September 5. "We don't have good news concerning the crop, and there is no solution that will last until farmers seed the next crop during this winter. And demand, particularly for feed, is increasing."


Wheat rose 18% on the CBOT since Russia resumed exports July 1, as drought spread across the Great Plains in the US and Europe began harvesting crops after the driest spring in three decades. The Standard & Poor's GSCI Agriculture index of eight commodities rose 11% while the MSCI All-Country World Index of equities slumped 17%. Treasuries returned 6.3%,a Bank of America Corp. index shows.


Global wheat demand will advance 3.4% to 676.9 million tonnes in the 2011-12 season, according to the USDA, which uses a combination of local marketing years for its estimates. The department increased its forecast in a report today. Stockpiles will total 194.6 million tonnes, up 0.7% from a year earlier after plunging 3.3% a year earlier, the department said.

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