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Russia rules out grain export curbs - for now

Russia eased grain buyers' concerns by rejecting an opportunity to introduce restrictions on exports for now to protect domestic supplies amid forecasts for a disappointing harvest.

A meeting of Russia's food security commission on Wednesday ended without imposing the export curbs that many have feared, and anticipation of which is believed to have fuelled a bumper start to 2012-13 for shipments despite a dent to yields from drought.

Arkady Dvorkovich, Russian deputy prime minister, said after the meeting: "We don't need to take any measures now - I mean measures to intervene on the market and regulate export.

"There are no grounds to ban export."

'Tariffs always possible'

However, wheat prices clawed back losses after Russia,  typically an exporter of rich amounts of price-competitive supplies, said it may yet impose restrictions further ahead.

Crop prices at close on Wednesday

Chicago corn (December): $8.16 per bushel, +1.8%

Chicago wheat, (September): $8.99 per bushel, +1.5%

Chicago soybeans, (November contract): $15.81 per bushel, +1.1%

Kansas wheat (September): $9.03 per bushel, +0.9%

Paris wheat, (November): E259.75 per tonne, +0.4%

London wheat, (November): £192.75 per tonne, -0.1%

"Tariffs are always possible for any commodity," Mr Dvorkovich said.

"In this calendar year I do not see any scenario under which this could happen. Could it happen next year? I don't know."

Mr Dvorkovich restated an official forecast for the domestic grains harvest of 75m-80m tonnes, offering an exportable surplus in 2012-13 of 10m-12m tonnes.

Wheat concerns

Other analysts have suggested greater damage to crops from hot and dry weather, including consultancy SovEcon, which this week cut its harvest forecast to 72m-75m tonne.

Particular concern has surrounded production of wheat, Russia's most important crop export, with SovEcon placing output at 40.5m-43.0m tonnes potentially falling below levels reached in the 2010 drought which prompted the country to ban grain shipments altogether.

As of Tuesday, with 38% of the summer harvest completed, wheat yields were down 29% year on year at 2.32 tonnes per hectare.

SovEcon has estimated Russia's wheat exports in 2012-13 at 8.5m tonnes, while Goldman Sachs on Tuesday, warning that Russia would "if needed" impose grain export taxes to protect supplies, forecast a 6.5m-tonne figure.

Some have highlighted the role of rising internal prices, rather than government restrictions, in quelling demand while Russia's Grain Union, estimating the exportable grain surplus at 12m-13m tonnes, said that restructions were not needed "under any harvest scenario".

Prices for export grade wheat edged 25 roubles higher to 8,300 roubles ($262) per tonne last week, according to SovEcon, despite the prospect of sales from state intervention stocks, and sagging international markets.

Market reaction

Russia's announcement was generally viewed as a little negative to prices, with US broker Benson Quinn Commodities saying that it "eased the fears of the bears".

However, wheat prices recovered early losses, helped by a revival in corn and soybean prices, and more positive interpretations of the move.

Indeed, broker RJ O'Brien noted a "positive" for wheat prices from the decision, in that it stands to sap Russian supplies, and take them quickly out of contention anyway as an exporter.

"At the current pace of Russian wheat exports, Moscow will be out of the wheat export market by end of November," RJ O'Brien's Richard Feltes said.

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