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Russia's role of cheap wheat supplier may be hurt in 2013

11 марта 2013 года

MOSCOW, Mar 11 (Reuters) - Russia's role as one of the cheapest wheat suppliers to the Middle East and North Africa may be jeopardised in 2013 as it looks to rebuild depleted stocks after last year's drought.

The damage to Russia's 2012 crop generated a huge premium for old wheat crop supplies versus new crop, attracting attention from exporters and the government.

Exporters expect domestic wheat prices to fall sharply in the coming months as the new harvest arrives in June or July, while the government plans to release stocks now and buy them back after the new crop.

"Usually Russia sells its wheat cheaper than others at the start of the season, but this year its potential would be limited and would make it harder to compete due to the modest exportable surplus and a need to replenish stocks," a trader said.

Russia's domestic wheat prices, which were rising from August until early February, need to decline by about 24 percent to match prices for the new harvest and by about 14 percent to make the origin competitive for the country's traditional markets such as Egypt.

Russia has in recent years been one of the cheapest suppliers on the world market, typically attracting interest from price-sensitive buyers in north Africa and the Middle East.

Global wheat prices were trading at multi-month lows last week after a U.S. government report raised wheat supply by more than expected with rising expectations for a strong harvest in Australia as well as the U.S. Plains limited the gains.

CBOT May wheat was seen at $7.00-1/2 a bushel, a lowest level since June, while the Paris benchmark May milling wheat contract was quoted at 230.25 euros ($300) a tonne, a lowest level since July.

Some buyers have already bought Russia's new crop wheat at $265-$275 a tonne on a free-on-board (FOB) basis for deep-water ports in Russia's South region, SovEcon agricultural analysts said in a note. Current prices were seen at $350 in the region.

The trader said that these contracts for the new harvest are not massive and likely to be hedged, but reflect the market focus on Chicago wheat futures contracts for July and September delivery seen at around $256-260 per tonne after bushel conversion last week.

The bottom price for Russia's new harvest is estimated at about $260-270 per tonne, the level at which the government plans to buy the new harvest to replenish stocks, the trader added.

"Government might be best buyers for the new crop but they are interested in buying wheat in the centre and centre east where the harvest is in August. Private traders will be buying in the South to export," said a European trader.

However, the government may buy grain this year in the South, which accounts for most exports, to ensure sufficient domestic supplies and stocks in case of a bad harvest.

"The timing of (intervention) purchases and the price they buy at is clearly something people are speculating about. Buying too much too early... could affect their competitiveness on the world market and the Russians have done a lot of work in the past assuring importers that they will be reliable suppliers," said a European trader.

"If they keep the market high they will allow everyone else around them to sell - like Ukraine, Bulgaria and Romania.

"I think if they have a good size crop the government will buy intervention stocks later in the year when prices go to a level that seems cheap to them, there's no reason for them to keep prices high," the trader said.

Since the start of this season the government has sold 2.2 million tonnes of grain from its intervention stocks and plans to sell an additional 2.3 million tonnes in the months to July.

"As new crop approaches, prices will start to fall ... - in May or June," Deputy Agriculture Minister Ilya Shestakov told reporters last week.

($1 = 0.7703 euros)

($1 = 30.8145 Russian roubles)

Source: Reuters  |  #grain   |  Comments: 0   Views: 48

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