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IKAR in Mass Media

Cheap Black Sea wheat to get pricier as storage improves

15 мая 2013 года

GENEVA/MOSCOW, May 15 (Reuters) - The Black Sea region may no longer be a source of deeply discounted wheat on world markets this autumn as improving storage and financing conditions mean farmers will have less need to sell urgently.

In the past, farmers in Russia and Ukraine sold quickly and aggressively, as storage capacity constraints and limited access to credit forced them to market immediately after harvest.

Major investment in grain infrastructure and storage in recent years in the region has convinced banks to participate more in financing the trade.

"They had no place to store and needed funds to complete threshing of late grains, sunflower and to process sugar beet, but now there is no real problem to find money, as traders and banks are ready to finance them," said Mykola Vernytsky, director of Kiev-based ProAgro consultancy.

While Russia and Ukraine are expected to store some grain, analysts said they would remain one of the world's cheap suppliers, typically attracting interest from price-sensitive buyers in north Africa and the Middle East.

"They like to be at the front when third country buyers come in for the new crop. When it comes to doing the business the Black Sea will make sure they are competitive, but we might not see the wider spreads that we've seen historically," said James Dunsterville, head analyst with Geneva-based Agrinews.

"The spread between their prices and the U.S. and France will be much closer but they will continue to be the cheapest."

Dunsterville estimated that new crop Black Sea prices were on par with U.S. soft red winter and French wheat at the moment. This compares with a discount of around $10 per tonne at the same time last year.

Global wheat prices have fallen by around 10 percent since the start of the year on the prospect of a major rebound in world wheat and corn production after droughts and adverse weather in major world grain growing areas last year.

"Russian farmers will be trying to hold grain for longer at the start of the new season in anticipation of higher prices," said Dmitry Rylko, head of the Institute for Agricultural Market Studies (IKAR).

"At the start of every season some volumes always go to market, because farmers need to repay short-term debt."

EARLY SALES

Agrinews' Dunsterville pointed out that risks including cold weather closing ports down for prolonged periods and the potential for governments to limit exports after crop problems would remain as factors encouraging some Black Sea farmers to sell early in the season.

Russia shocked grain markets with a one-year export ban in 2010 when drought ravaged that year's harvest. While a drought in 2012 did not result in the same extreme measures, past experience has made those in the agriculture industry wary.

In April, Ukraine lifted a cap on wheat exports which was introduced last September after a drought and a spike in foreign demand threatened to leave the country without enough grain for domestic consumption.

The U.S. Department of Agricultural forecasts Ukraine 2013/14 wheat production rising 40 percent on last year to 22 million tonnes, while Russia's wheat output is expected to rebound by 48 percent to 56 million tonnes.

However, analysts and traders say these estimates may prove too optimistic, as dry weather is again raising the risk of damage to Black Sea grain crop yields.

Source: Reuters  |  #grain   |  Comments: 0   Views: 62

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