IKAR in Mass and Industry Media

Russian grain falls on export competition, new crop

Reuters

MOSCOW, July 13 (Reuters) - Russian grain export prices weakened in the last week as competitors lowered prices and new-crop grain appeared on the domestic market, analysts said. Exporters were selling ordinary milling wheat at between $165 and $170 per tonne, free on board (FOB), from the Black Sea port of Novorossiisk, the Institute for Agricultural Market Studies (IKAR) said. Moscow-based analyst group SovEcon said Russia was exporting fourth-grade milling wheat in a range of $167-175 per tonne.

"There was no demand for Russian wheat in the latest Egyptian tender, as competitors continue to lower prices," SovEcon said. Feed barley export prices also dropped to about $120 a tonne, FOB Novorossiisk, and as low as $100 a tonne in small ports on the Azov sea, IKAR said.

But a weaker rouble, which on Monday fell beyond the 39 mark versus a euro-dollar basket for the first time since March, is helping Russian grain to be more competitive in world markets.

"The world market is not far from stabilising and, when that happens, Russian grain export prices can also be expected to stabilise," SovEcon said.

LOWER DOMESTIC PRICES

Russian domestic grain prices have fallen due to more of the new crop hitting the market.

Some farmers are holding grain back in the hope of achieving higher prices, but not all can do that because they need cash to finance harvesting and the winter-sowing campaign.

Exporters are buying fourth-grade milling wheat at about 4,400 roubles a tonne, CPT Novorossiisk, or about 100 roubles less than in the previous week, SovEcon said.

Third-grade wheat in the European part of Russia fell 350 roubles to 5,125 roubles a tonne, SovEcon said, while domestic sales of fourth-grade wheat fell 525 roubles to 4,225 roubles.

Feed wheat costs around 3,800 roubles a tonne and barley between 3,200 and 3,300 roubles, CPT Novorossiisk.

Government intervention purchases, due to start on Aug. 1 at a price of 4,900 roubles a tonne for milling wheat, could lend support to the domestic market. But IKAR said this could create unrealistic expectations among farmers.

"Currently, farmers are unwilling to sell at market prices and rather are waiting for higher price," IKAR said.

"Such a 'double market' situation is dangerous for domestic players in the longer term, as it creates unrealistic farmers' expectations for sizeable 'price rescue' operations on behalf of the government."

Crude sunoil export prices fell to $700 a tonne, FOB Novorossiisk, while domestic sunseed purchase prices dropped to $280 a tonne, IKAR said.

White sugar prices in the southern Russian city of Krasnodar have fallen slightly in rouble terms, while in dollar terms they have fallen more dramatically to $687 a tonne from $707 in the last week. Demand is relatively weak, while supply is abundant.

30.07.09

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