October 12, 2011


Russian grain prices increase after revived plans on levy


Russia's grain prices increased rapidly after its revived plans on grain export duties, according to Russian deputy prime minister, Viktor Zubkov.


While Russia has seen a sharp revival in its grains production from last year's drought affected levels of 61 million tonnes with Mr Zubkov pegging the harvest at 90-92 million tonnes and Prime Minister Vladimir Putin estimated that the crop at 95 million tonnes, keen prices have seen a surge in supplies leaving the country.


He said that Russia had exported 10.7 million tonnes of grain since in July, the start of the 2011-12 crop year, lifting an 11 month ban on shipments imposed because of last year's poor harvest.


On futures markets, thoughts of the removal of a fierce competitor from export markets added further fuel to a rally kicked off by talk of fresh Chinese buying of US corn and soy. December wheat leapt 8.8% in Chicago at one stage to a one month high of US$6.65 a bushel.


Tuesday's (Oct 11) grain prices at close.


Chicago wheat: US$6.603/4 a bushel, +8.1%; Chicago corn: US$6.451/4 a bushel, +6.6%; Chicago soy: US$12.351/4 a bushel, +4.9%.


Chicago corn for December locked up the exchange maximum of US$0.40 a bushel at US$6.45 a bushel.


China is rumoured to have bought at least six to eight cargoes of American soy, with markets also echoing to talk that a key US government report published will reveal tighter numbers on domestic crop supplies than investors have priced on.


In Paris, November milling wheat closed up 4.2%, while London feed wheat fort the same month added 2.5%.


'Mr Zubkov said Russia could "afford" grain exports in 2011-12 of 23-24million tonnes, to leave sufficient stocks for domestic consumption. 


This still leaves room for the country to set a record, beating the 23.2 million tonnes reached in 2008-09.


However, he declined to detail how his tax plan would restrict exports; beyond saying it would involve a "floating tariff" which would not be introduced this calendar year.


By then, 2011-12 exports may have reached 18-19 million tonnes, he said. Sergei Ignatyev, the governor of the country's central bank, in June urged a duty on exports once the price of third grade milling wheat tops at RUB6500 (US$205.5), then about US$235 a tonne, a measure Mr Zubkov said at the time was "possible".


A levy on grain exports holds the potential for reaping a number of benefits for Russia, in underpinning domestic supplies, so keeping food inflation in check and fulfilling strategic aims to nurture its livestock industry.


Russia was the top importer of chicken until last year, when measures to boost domestic production bore serious fruit, and remains the biggest net importer of beef. However, limits on grain exports threaten, for a second season, to deny growers the full benefit of international prices.


Russia's step backwards from international markets also appears a fillip to an attempt by Ukraine to reignite its export performance, which has been severely weakened so far in 2011-12 by cargo levies which Kiev's parliament voted last week to abolish.

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