• IKAR in Mass Media

 

 → IKAR in Mass Media → #51

IKAR in Mass Media

ANALYSTS FORECAST GROWTH IN RUSSIAN GRAIN PRICES DUE TO SITUATION ON WORLD MARKET

19 октября 2006 года

Russian grain market analysts are forecasting growth in the cost of Russian grain in the near future as a result of significant price hikes on the world market.

"Russian [grain] prices became tied to world prices a long time ago and follow them closely. As a result, every sneeze on the foreign market leads to changes in our prices with some variations," The Institute for Agricultural Market Studies (IKAR) general director Dmitry Rylko told Interfax.

Class-4 wheat (basically ordinary food wheat) has a key structural position on the market this year, he said.

WJ InterAgro analyst Vladimir Petrichenko said prices on U.S. wheat, which is similar to Russian class-4 wheat, grew to $210 per tonne (FOB) at the end of last week. "Prices haven't been that high for the last ten years," he said. Prices have increased by $47 since mid-September. This is mainly the result of low forecasts for grain harvests in Argentina, Australia and Europe, he said.

These trends have led to growth in demand for grain exports and an increase in the cost of grain, Petrichenko said. Wheat export prices have grown by 100-200 rubles per tonne in the last week. The cost of barley, one of the main crops Russia exports, has also been increasing.

The cost of exported grain could rise by more than 10% in October-November and prices on the Russian market could increase as well, he said.

"For now, there are no signs that world [grain] prices are going to fall and that means the trends with our prices will be the same. There is still potential for them to grow, although restricting factors could appear," Rylko said.

The current situation on the market could provide an impetus to the start of commodity interventions as the government will begin selling grain purchased for the Intervention Fund to lower prices domestically, he said. This will likely happen not earlier than from February, Rylko said.

"The further development of the domestic market greatly depends on whether there are going to be commodity interventions or not," Nikolai Demyanov, director of the marketing department at the International Grain Company, told Interfax. Commodity interventions were held for the first time in the first half of 2004 and they led to the introduction of export customs duties on grain, he said. "At first glance, this was logical, but there was a shortage that year and this year the grain supply is stable," he said.

If commodity interventions are held without restrictions on grain exports, exporters will be able to uniformly export grain, and prices, particularly in southern Russia, will continue to grow as they follow world prices. Under these conditions, wheat exports could amount to 7.5 million-8 million tonnes.

"If exports are cut off, some 6.5 million tonnes of wheat will be able to be exported before February taking into account the current rates, and the remaining 1 million-1.5 million tonnes from the south will be sent to the central part of the country, where the situation is stable without them and there is no shortage. As a result, prices would fall on the market," Demyanov said.

The Intervention Fund currently contains 1.6 million tonnes of grain, enough for two months for milling enterprises, he said. "But if an export duty is introduced, the remaining 1 million-1.5 million tonnes from possible exports will have to added to that amount and then the timeframe will increase to 3-4 months. This means that prices will drop right up until the new season," he said.

The situation on both the external and domestic market is rather unstable, Rylko said. "It can't be ruled out that things aren't that bad in Australia and Argentina, relatively excessive grain supplies may be found in Europe and other factors may appear that would cause prices to fall in second part of the season," he said.

Source: Interfax  |  #grain   |  Comments: 0   Views: 72

There are no comments yet. Be the first!

Only authorized users can comment.