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IKAR in Mass Media

Russia grain stock sales seen inadequate to resolve tight market

23 октября 2012 года

MOSCOW/LONDON, Oct 23 (Reuters) - Russia kicked-off a series of wheat stock sales designed to address food inflation on Tuesday, but traders and analysts said they would not be enough to lower domestic prices, predicting more action would be needed.

Russia, one of the world's key wheat exporters, plans to sell up to 20 percent or 1 million tonnes of grain from its government stocks after hot and dry weather slashed its grain harvest by a third this year, sending global and domestic prices soaring.

The government intends to sell up to 110,000 tonnes of grain per week from Oct. 23 until the end of the year, beginning with the sale of 42,955 tonnes of grain on Tuesday.

"In all likelihood if one million tonnes isn't enough they're going to sell some more and the question is how much do they have and how low will they let state reserves get?" said Bill Tierney, chief economist with Chicago-based AgResource Company.

"If they're not willing to allow stocks to go below a certain level and they want to address high prices the government will authorise or permit imports, most likely from Ukraine and Kazakhstan."

Russia may this year double its usually small imports of grain from neighbouring Kazakhstan and Ukraine to cover shortfalls due to drought in some regions and ensure minimum inventories, analysts and industry sources said last month.

The U.S. Department of Agriculture forecasts Russia's wheat stocks at the end of the 2012/13 season will fall to a five-year low of 5.4 million tonnes, barely more than half the prior season's 10.4 million.

Dealers said that as much of Russia's stored wheat is in locations well away from the population centres where it is needed, unless the government subsidises its transportation, the intervention sales won't address food inflation.

Domestic grain prices are not expected to fall because the government plans to sell grain in only three regions; Urals, Siberia and far east, said a large trader.

Russia's average domestic wheat prices jumped almost 50 percent since early June to a record high, while Chicago wheat futures are up around 25 percent since the beginning of June.

"Interventions can restrain price increase in Russia's East regions, but will not have any impact on Russia's Central Region market," said Dmitry Rylko, the head of Russia's Institute for Agricultural Market Studies (IKAR).

EXPORT EMBARGO

Traders have speculated for months that Russia, along with its neighbour Ukraine, could restrict exports as happened in 2010 when a severe drought prompted Russia to ban grain exports for almost a year.

"No one should be surprised that at a certain moment Ukraine is going to stop exporting this year and the same will happen for Russia," said a European trader.

Ukraine's agriculture ministry said on Friday the high pace of wheat exports would exhaust stocks of Ukrainian wheat available for shipping abroad by Nov.15-20 and urged traders to be cautious in concluding new contracts.

Russia's 2012/13 exportable grain surplus is officially seen at 10 million tonnes, of which 9.35 million tonnes has already been sold since the start of this marketing year on July 1, IKAR's Rylko said.

There were rumours that Russia could follow Ukraine and would ban grain exports again, but Russian officials rejected such speculation, saying they would oppose any ban on grain exports.

Dealers said Russian wheat had already been priced out of the market with comparable qualities of wheat from other suppliers available at cheaper prices.

"Short of cancelling shipments that have already been contracted, they are already out of the global market, except for country to country sales that are done for strategic reasons," said Tierney, noting a recent sale to Syria.

"The vulnerability is what if their crop falls short next year. When the government has intervention stocks they have them for two reasons; to support prices for political reasons at harvest, and the second reason is to dampen prices for political reasons when prices are seen to be painful."

Source: Reuters  |  #grain   |  Comments: 0   Views: 55

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