PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 12:51 UK, 27th Feb 2013, by Agrimoney.com
Sovecon cautions over Russia grain export rebound

Sovecon urged caution over prospects for a rebound in Russia's grain exports in 2013-14, despite questioning market ideas that the country may be in for a large rebuild of fast-depleting state inventories.

Earlier on Wednesday, Nikolai Fyodorov, the Russian agriculture minister, appeared to signal a willingness to rebuild state grain inventories, which are expected to be left nearly empty at the close of 2012-13 by sales into a domestic market clamouring for supplies after last year's drought hit harvest.

"My feeling is" that the start of intervention purchases "will be August or September", he told a meeting of the National Grain Producers' Union.

Last month, Ilya Shestakov, deputy farm minister, said that "if the harvest is good next year, we will consider replenishing these [intervention] stocks", which he saw ending the season at potentially 300,000 tonnes, after sales of some 4.5m tonnes.

Prospects for intervention buying are proving particularly sensitive given the thin levels of overall Russian supplies, and the outlook for this year's harvest which Andrey Sizov, the Sovecon managing director, termed "not that good" thanks to weather setbacks.

'Mechanism for market stabilisation'

In fact, Russia has a legal framework governing intervention buying which means that the level of purchases - if there are any at all "is not at all clear yet", Mr Sizov said.

The purchases are based on a support price set at the end of March, and historically based on the previous year's price, plus an added percentage.

"If the market goes below the threshold price, the government will start intervention buying," Mr Sizov told Agrimoney.com.

"They do not say they want to buy a certain volume a year. Intervention - buying when prices fall too far, and selling when they rise - is a mechanism for market stabilisation."

Winterkill

Nonetheless, Mr Sizov was cautious on grain volumes which will be left to support exports in 2013-14, saying that while it was early in the season to be making forecasts, it appeared unlikely that they would approach last season's record of 28m tonnes.

They were likely to be closer to this season's exports, forecast at about 15m tonnes.

The country is set to end the current season with a thin level of overall carryover stocks, after a surge of early-season shipments exacerbated the impact of a disappointing harvest.

And the outlook for the 2013 harvest is not promising, after poor winter conditions left an estimated 12% of autumn-sown grains in poor condition, a higher-than-average rate of weather damage.

While some of this area will be resown in the spring, "much of it might go to non-grain crops", such as peas or sunflowers, Mr Sizov said.

"If you look historically, fluctuations in spring grain acreage are very low."

Price factor

Winter grain plantings had already proved disappointing, in part thanks to autumn dryness, and in part to fears which have turned out to be unfounded that the government would ban exports to protect domestic grain supplies, so sending prices tumbling.

In fact, prices have hit record highs, although weakening a little this month to some $385 a tonne, as measured by Central Russian food wheat.

"This price needs to drop by more than $100 a tonne for new crop to become competitive," Mr Sizov said.

While this was a possibility, "it will take some time", another reason to expect a slow-start to 2013-14 exports.

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