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DJ Russia Wheat Prices Rise as Frost Threatens Winter Crop – Experts

Dow Jones Newswires, 14.01.13

Russian wheat prices have risen as frost threatens to damage up to a quarter of the country's crop in some southern and western regions, industry experts told Dow Jones Newswires Monday, although the prospect of fresh snowfall could help temper further losses.

"The most affected area looks like parts of Samara, south-west parts of Tatarstan, south-east of Voronezh, south and west of Volgograd, and north and north-east of Rostov," said Dmitry Rylko, general director at the Institute for Agricultural Market Studies, known as IKAR.

"It's difficult to assess the damage in these regions, but I would say between 5% and 25%," Mr. Rylko said.

Particular attention is focusing on Russia's massive "breadbasket" region in the south of the country, with fears growing that the size of its wheat crop could be smaller than forecasters had been expecting, threatening to shrink the world's exportable surplus.

Andrey Sizov Jr., managing director of Moscow-based agricultural think tank SovEcon, said December's temperatures of around minus 20 degrees Celsius had been exacerbated by a lack of snow coverage, which normally helps protect crops from the cold, and slightly worse-than-average winter planting conditions.

However, Mr. Sizov added it is hard to estimate potential losses at this point, with a clear picture only likely to emerge in early March. Nevertheless, he noted SovEcon's estimate for the country's total grain crop is likely to be revised down from 81 million to 87 million metric tons.

Winter wheat, which is harvested from July, accounts for about 60% of the country's total annual production.

IKAR's Mr. Rylko said forecasts for fresh snowfall will provide protection against winterkill and help avoid more losses, but in some spots the cover is still likely to be insufficient.

He added that the rise in Russian wheat prices is in contrast to the fall in prices in international markets since the New Year, with signs of further strengthening in the south and in western Siberia as some end users cover shorts.

Data released Monday by SovEcon show domestic prices for third-grade milling wheat rose 0.7% to 11,325 rubles ($374.33) a ton for the week ended Jan. 11, and fourth-grade milling wheat also increased 0.7% to RUB11,325/ton. Meanwhile, wheat flour rose 1.8% to RUB15,975/ton and feed wheat increased 0.5% to RUB10,900/ton.

Rob Bailey, senior research fellow for energy, environment and resources at Chatham House, a London-based independent think-tank on foreign affairs, said frost damage from the cold weather may drive up prices further, though hopefully not enough to tempt the government into imposing export controls.

IKAR's Mr. Rylko said he foresees no such problems as Russia's south is "sharpened to international markets and not domestic ones" making it "next to impossible to imagine a lack of surplus, even in a very bad year."

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