November 6, 2008

Russian grain prices fell further, hurt by high supply, the shortage of railway cars and various exporters stopping purchases at port elevators.

According to the Institute for Agricultural Market Studies, domestic prices appear to have decoupled from international prices in the last two weeks.

While international prices stabilised or even went up by the start of the week, Russian export prices have fallen under the burden of the domestic and regional supply pressure. Producers need cash and are ready to sell at any price, IKAR added.

If world prices were fixed at current levels Russian prices might stabilise in the near future at levels several hundred roubles lower than current indicators.

With the absence of support from world markets the role of the state purchase interventions is increasing. The government has decided to raise the support price for third-grade wheat to RUB5,500 (US$203.2) from a previous RUB5,000-5,100.

IKAR said the Forward FOB ordinary food wheat price has declined to US$170 per tonne and lower in Novorossiisk.

Third-grade wheat fell by US$7 down to US$175 per tonne ex-silo, last week in the south of Russia, fourth-grade to US$135, fifth-grade to US$111.

SovEcon said grain offer prices fell by RUB175-275 per tonne last week on average. Demand was low due to the reluctance of processors to build up stocks on the falling market and shortage of credit resources.

Russian 2008/09 grain exports exceeded 8.2 million tonnes, including 7.3 million tonnes of wheat.