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Russia Lifting Grain-Export Ban May Fail to Alleviate Shortage

07 июня 2011 года

May 30 (Bloomberg) -- Russia, once the world's second-biggest wheat exporter, will let a grain-export ban expire on July 1, a move that may fail to relieve a shortage caused by drought and flood damage to crops in Europe and the U.S.

Futures jumped 79 percent in the past year in Chicago, the global benchmark, as poor weather from Canada to Russia and Europe destroyed harvests. Russia's export ban in August and Ukrainian shipment quotas cut supplies, helping global food costs tracked by the United Nations jump to a record in February.

"Whether they actually have major exports from that time or not remains to be seen," said Michael Pitts, commodity sales director at National Australia Bank. The ban's removal doesn't necessarily mean there will be enough supply to offset losses in Europe and the U.S., he said in an interview from Sydney today.

Increasing food costs have contributed to faster inflation around the world, spurring at least two dozen central banks and the European Central Bank to raise interest rates this year, data compiled by Bloomberg show. Higher interest rates may curb global economic growth the Organization for Economic Cooperation and Development said May 25 would increase to 4.6 percent next year from 4.2 percent this year.

Farmers in Russia planted 10 percent more and stockpiles exceed 6 million metric tons, First Deputy Prime Minister Viktor Zubkov said on May 28, according to a government statement. Grain traders accelerated purchases in the past several weeks, moving supply to silos near ports in anticipation the ban would end, agricultural researcher SovEcon said May 20.

Time to Resume

Exports from Russia are unlikely to be a record and may take time to resume, said Dmitry Rylko, general director of the Institute for Agricultural Market Studies in Moscow. Concerns about the weather and crops around the world mean "we shouldn't expect a significant price drop," he said.

Farmers worldwide will reap 667 million metric tons of wheat in 2011-2012, trailing demand of 669 million tons, the International Grains Council said May 26. The agency pared its production estimate from 672 million tons in April, cutting stockpiles to 185 million tons, the lowest since 2008-2009.

The harvest prediction was reduced because of unfavorable weather in a number of countries, especially the European Union and the U.S., it said. Traders are expecting Russia to lift the embargo, it said May 26, two days before the announcement.

Prices are unlikely to slump as the market has already anticipated Russia's return, said Vijay Iyengar, managing director of AgroCorp International Pte in Singapore, who correctly predicted in February that corn would be the best-performing agricultural commodity in the first half.

Poor Condition

In the U.S., the world's largest wheat shipper, about 45 percent of the winter wheat crop was in very poor or poor condition as of May 22, compared with 44 percent a week earlier, and 9 percent a year earlier, the USDA said May 23. About 54 percent of the U.S. spring-wheat was planted, behind last year's pace of 89 percent, also the average in the past five years.

France's soft-wheat crop, the European Union's largest, will drop 12 percent, and German output will slide 7.2 percent, local forecasters said May 18.

While Russia's exports may add to the supply of global feed wheat, there will still be a shortage of the higher-grade grain used for making bread, pasta and noodles, said Ric Pinca, executive director of the Philippine Association of Flour Millers, in a phone interview from Manila today.

About 124 million tons of the 670.5 million tons of wheat demand in 2011-2012 is intended for feed and the rest for food, the U.S. Department of Agriculture said May 11.

Asia Buyers

Buyers in Asia including Japan, South Korea, Taiwan, China and the Philippines are unlikely to rush to the market to buy Russian wheat, considered to be lower quality than that from the U.S., Canada and Australia, said Pinca. The Philippines is the second-largest buyer in Southeast Asia.

In Canada, planting was also delayed by excessive rains. About 53 percent of the crop was planted, trailing the normal pace of 75 percent, the Canadian Wheat Board said May 24.

By contrast, Russia's Agriculture Ministry estimates the total grain harvest may be 85 million to 90 million tons, up from 60.9 million tons last year.

Russia will export 10 million tons of wheat in the 12 months ending June next year, up from 4 million tons in the current year, according to the USDA. That's less than the 18.6 million tons sold a year earlier. Corn shipments will increase to 1 million tons from 25,000 tons and barley cargoes to 800,000 tons from 300,000 tons, the USDA estimates.

Ukraine President Viktor Yanukovych said in an interview May 24 he would lift export quotas because of forecasts for a 15 percent increase in the harvest. Ukraine, once the world's biggest barley exporter, set shipment quotas on corn, wheat and barley in October after drought ruined crops.

Wheat for July delivery advanced 0.6 percent to $8.1975 a bushel on the Chicago Board of Trade on May 27, while corn jumped 1.7 percent to $7.585 a bushel. The Chicago markets are closed today for a public holiday.

Source: Bloomberg  |  #grain   |  Comments: 0   Views: 41

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