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Russia rejects grain export limits as crop outlook cut

31 августа 2012 года

MOSCOW, Aug 31 (Reuters) - Russia's government, coping with a drought which has slashed grain yields by a more than a quarter, will not limit grain exports even if its exportable surplus is exhausted, Deputy Prime Minister Arkady Dvorkovich said on Friday.

Markets had been bracing for an indication of some controls on Russian grain exports after severe drought prompted progessive crop downgrades, raising concerns of a blanket ban as happened after similar weather in 2010.

December wheat on the Chicago Board of Trade fell 17-1/2 cents or 1.9 percent to $8.85-1/2 a bushel by 1455 GMT, while November milling wheat in Paris stood 4.00 euros or 1.5 percent lower at 262.75 euros a tonne.

While prices fell, analysts believe export taxes or quotas are still possibile as Russia seeks to avoid the sort of dent to its reputation as a reliable major grain supplier suffered two years ago, when it was world No.3 wheat exporter.

"It's a classic. They are playing a waiting game, giving the trade time to do their business and then they will impose taxes, or something else," said analyst Pierre du Peyroux of Horizon Soft Commodities.

Traders took a similar stance on Russia, which only last week joined the World Trade Organization

"It just a headline grabbing stunt. In 2010 they kept being reassuring and then they changed their mind suddenly (and banned grain exports). They could do just the same this year," one trader said.

Russia is a key grain supplier to world markets which have seen droughts on either side of the Atlantic send wheat prices to their highest levels since 2008, when riots over soaring food prices broke out in a number of countries.

CATEGORICAL

Dvorkovich told reporters no export curbs were planned.

"We consider any export restrictions harmful. We will use the instruments we have - market interventions and information exchange with market participants."

He was speaking after chairing a meeting of the government's food security commission, which was closed to the press.

"As long as I am in charge of this sector, I will be against any export restrictions," he added.

Agriculture Minister Nikolai Fyodorov told reporters the ministry now forecast the grain harvest in a range of 70-75 million tonnes. Its previous forecast was 75 million tonnes.

The wheat forecast was cut to 40-42 million tonnes from 45 million tonnes, he added.

Russia barred grain exports for almost a year in August 2010 after its worst drought in decades. Some market observers have speculated this year Russia's wheat harvest may fall below the crop of 2010, when it brought in 41.5 million tonnes of wheat out of a total grains harvest of 61 million tonnes.

"Domestic requirements will be covered 100 percent. There is an exportable surplus of 10-14 million tonnes," Fyodorov said. Wheat would account for about 80 percent of Russia's exportable surplus, he added.

Analysts and traders view that range as unrealistic, and say the real surplus could be as little as 9-10 million tonnes.

It is being rapidly exhausted in the early months of the season. Dvorkovich said 4.6 million tonnes had already been exported in the new crop year, which started on July 1.

But he said Russia would use market interventions to cool domestic prices if the surplus ran out. Traders have said it may happen as early as October-November.

Russia could export from 3 million to 3.3 million tonnes of grain in September, Russia's two main grain market analyst groups said on Friday.

But Russian exports could slow because of high domestic prices, if Russia delays its plan to sell a part of its 5-million grain interventions stock, Andrei Sizov Sr., chief executive of SovEcon agricultural analysts, told Reuters.

"If interventions are delayed until December, domestic prices will increase and it will be more profitable to sell grains at home than on export markets," Sizov said.

EXPECTATIONS DASHED

Fyodorov said Russia had harvested 32.3 million tonnes of wheat by Friday. The country completed 62 percent of its harvest campaign, while grain yields have fallen 27 percent from year-ago levels. Particularly hard hit are the Urals region and Siberia, key to domestic supply.

As of Aug 31, Siberia harvested 3.5 million tonnes of grains from 34 percent of sowed area with yields at 1.05 tonnes per hectare, Agriculture ministry said on its website www.mcx.ru. Yields were down 35 percent, year-on-year, and down 27 percent from the level of 2010.

Russia consumes approximately 70 million tonnes of grain per year. In addition to domestic supply concerns, the government is wary of resurgent inflation, which has plagued the post Soviet economy.

Consumer prices rose 5.6 percent last month, suggesting the central bank may struggle to keep growth within the target range of 5-6 percent this year.

Russia's Institute for Agricultural Market Studies (IKAR) has cut its full year grain crop forecast to 69-70 million tonnes. Its 2012 wheat harvest forecast now stands at around 39-40 million tonnes, its head Dmitry Rylko said on Friday.

Source: Reuters  |  #grain   |  Comments: 0   Views: 50

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