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Falling Russian domestic wheat prices trigger defaults

18 февраля 2013 года

MOSCOW, Feb 18 (Reuters) - Russian wheat buyers are starting to default on previously agreed contracts as domestic wheat prices continue to fall due to sales from government stocks, an analyst said on Monday.

Last week the Russian government extended the number of regions allowed to buy grain from its stocks as it attempts to ease supply after last year's drought, which damaged crops and sent wheat prices to record levels.

"Some buyers are decreasing prices, some are starting to ask for payment delays, while some are tending to refuse (to pay) already concluded contracts," SovEcon agriculture analysts said in a note on Monday.

Demand from grain consumers is falling for the third week as many of them are already buying or expect to buy cheaper grain from government intervention stocks, SovEcon added.

Since the start of this marketing year on July 1, the government has sold 1.81 million tonnes of grain. For the whole 2012/13 season its sales are expected to reach about 4.5 million tonnes.

"There are some payment delays, but I have not seen any force majeure yet," a large wheat seller told Reuters.

He added some buyers were likely to abandon deals on a limited number of contracts as the government was unable to meet demand quickly enough, selling up to 130,000 tonnes of wheat and other grains from its stocks per week, or about 0.52 million tonnes per month.

The Russian domestic market consumes more than 30 million tonnes of wheat per year, meaning more than 2.5 million tonnes per month.

The country is also trying to cover its domestic demand by importing more grain between July and January this season than it has since the 2008/09 crop year.

Supplies reached about 180,000 tonnes for the first two weeks of February and mainly came from Kazakhstan, the Institute for Agricultural Market Studies (IKAR) said in a note. Import of non-Kazakh grains stood at about 35,000 tonnes, it added.

The average domestic EXW (ex-silo) price in the European part of Russia for third-grade and fourth-grade milling wheat declined by 175 roubles and 150 roubles, respectively, to 11,500 roubles ($380) per tonne last week, SovEcon said. During the first week of February prices fell 25 roubles.

Feed wheat lost 125 roubles to reach 11,150 roubles per tonne last week, while barley fell 100 roubles to 9,500 roubles per tonne.

IKAR pegged milling wheat in Russia's South at 10,500-11,000 roubles per tonne last week, down 500 roubles.

The drought sent domestic wheat prices to record highs, making it unattractive for export.

Meanwhile, purchasing prices for maize (corn) fell to 9,000-9,300 roubles a tonne on a carriage-paid-to (CPT) basis last week from 9,300-9,500 roubles per tonne, SovEcon added.

Domestic prices for sunflower seeds fell 150 roubles to 16,550 roubles per tonne, according to SovEcon. Export prices for crude sunflower oil were flat at $1,175 a tonne on a free-on-board basis.

Sugar prices were down $11 at $708 a tonne in Russia's south, IKAR said.

($1 = 30.1365 Russian roubles)

Source: Reuters  |  #grain   |  Comments: 0   Views: 44

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