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Russian Grain Prices Bending under the Harvest

georgiatoday.ge, 15.08.17


Last week, grain prices in central Russia and the Volga region fell by 250-700 Rubles per ton, the biggest drop since the beginning of the season. The market is being pressured by a large crop, record reserves, as well as a lack in trucks and elevator capacity. If the same situation repeats in the south of the country, it can be expected to lower the export prices of Russian grain.

Analytical center Sovecon claims this is the largest decline in the regions since the beginning of the season. The average prices for wheat of the fourth class decreased by 275 Rubles to 8.1 thousand Rubles per ton. Barley has fallen in price by 250 Rubles to 6.55 thousand Rubles per ton. The fall in prices for wheat of the third class was less significant - by 100 Rubles (up to 8.95 thousand Rubles per ton).

The prices have been crushed by a huge harvest, Sovecon explained, going on to forecast the rise in the grain harvest as up to 125.2 million tons (including 77.9 million tons of wheat). In 2016, Russia collected a record 120.7 million tons of grain (73.3 million tons of wheat). Given the good yield and high harvesting rates, this season the USSR record of 1978 may be broken, when 127 million tons of grain were harvested. The Russian Ministry of Agriculture still maintains a forecast for the collection of grain at a level of 103-105 million tons.

In addition to the high harvest, record-breaking carry-over stocks are now pressing the market, says Arkady Zlochevsky, President of the Russian Grain Union (RGU). On July 1, Rosstat estimated their volume at 15.3 million tons, which is 12 percent more y/y.

The dynamics of domestic prices is also affected by the shortage of elevator capacity in the Volga region and the lack of trucks for the operational transportation of grain, Soevcon reports. “In such a situation, the formation of surplus is inevitable, therefore the fall in domestic prices can be significant," said Dmitry Rylko, Director General of the Institute for Agrarian Market Studies.

“Domestic prices were also affected by the beginning of the restructuring of the grain market, during which the largest exporters refuse intermediaries and purchase grain directly from producers or commission agents,” Zlochevsky points out.

He believes that the decline in domestic prices, in the long term, will affect the southern regions, where the main volumes of grain go for export. According to Sovecon, the demand for fourth grade wheat in ports last week remained in the range of 10.2-10.4 thousand Rubles per ton. Export prices fell from $198 to $196 per ton (according to FOB). At the same time, according to the analytical center, the main Russian competitor in the world wheat market, France, last week had export prices in the range of $190-192 per ton.

On Friday, the Russian Ministry of Agriculture reported that from July 1 to August 9, Russia increased grain exports by 24.1 percent to 3.65 million tons (wheat by 2.6 percent, to 2.4 million tons). Acceleration of shipments by the President of the Russian Grain Union (RGU) connects with favorable conditions for exporters on the domestic market. “According to the results of the season, Russia can export 38 million tons of grain against 35.5 million tons in the past,” said the head of the Ministry of Agriculture, Alexander Tkachev.

http://georgiatoday.ge/news/7284/Russian-Grain-Prices-Bending-under-the-Harvest



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