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Russian wheat prices rise on concerns over Black Sea crops

Reuters, 06.06.17

Russian wheat export prices have risen for a third consecutive week due to persistent concerns over wheat crops in Russia and Ukraine to be harvested this summer, analysts said.

Last week, Russia’s agriculture ministry downgraded its forecast for Russia’s 2017 grain crop to 100-105 million tonnes from a previous 110 million tonnes due to unfavourable weather.

SovEcon said Black Sea FOB prices for Russian wheat with 12.5 percent protein content rose by $1 at the end of last week from a week earlier to $187.50. IKAR, another Moscow-based consultancy, said prices remained at $186 per tonne.

SovEcon pegged prices for the new crop for July-August delivery at $173-$177 a tonne, up $1.50, while IKAR put prices at $176, up $2 from the previous week.

Russian prices have also been supported by demand from Egypt, the largest market for Russian wheat. Last week, Egypt’s state buyer agreed to buy 120,000 tonnes of Russian and 60,000 tonnes of Romanian wheat, for July 1-10 delivery.

SovEcon expects the contracts to be fulfilled with new crop supplies. Russian agriculture supplies to Ankara have also been restored last week after Turkey’s short-lived limits on Russian imports as President Vladimir Putin lifted restrictions on hiring Turkish workers in Russia.

Russia exported 33.2 million tonnes of grain, including 25.6 million tonnes of wheat, from July 1 to May 31, the agriculture ministry said. That equated to a 1.7 percent rise year on year.

Spring grain sowing is currently running 1.1 million hectares slower than a year ago, closing a gap of 1.3 million hectares seen a week earlier.

As of June 2, farmers had sown spring grain on 93 percent, or 28.7 million hectares, of the planned area, the ministry said, against 29.6 million hectares on the same date last year.

According to SovEcon, there were no reasons for a significant downgrade of its grain crop forecast so far despite cold and rainy weather. A warmer spell is expected in Russia’s most European regions from the second half of this week.

SovEcon plans to update its forecast for Russia’s 2017 grain and wheat crop after June 10. Its latest estimate was published in May with 115.3 million tonnes of grain, including 70.4 million tonnes of wheat.

The month of May in Moscow, located in central Russia, was the coldest May so far this century, TASS news agency quoted the state weather forecaster Hydrometcentre as saying on Saturday.

However, the cold has not affected most of Russia’s southern wheat producing and exporting regions.

Domestic prices for third-class wheat were down 25 roubles from a week earlier to 9,100 roubles ($160.5) a tonne in the European part of Russia on an ex-works basis, SovEcon said. Ex-works supply excludes delivery costs.

Russian sunflower seed prices rose by 725 roubles to 18,425 roubles a tonne, SovEcon said, while domestic sunflower oil prices added 250 roubles to 40,825 roubles and export oil prices rose $5 to $715 a tonne.

SovEcon currently expects Russia’s 2017 oilseed crop at 16.2 million tonnes, down 500,000 tonnes from a year ago. The estimate includes 10.8 million tonnes of sunflower seeds, down 200,000 tonnes from 2016.

Russian sunflower oil producers are worried by rising sunseed exports and have asked the government to impose additional measures to limit the exports, SovEcon said.

It said sunseed exports, that are currently liable to a 6.5-percent tax, rose threefold to 197,000 tonnes in October-April compared with the same period in the previous year.

IKAR’s white sugar price index for southern Russia rose by $46 to $653 a tonne as of June 2.

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