IKAR in Mass and Industry Media

Russia to intervene on domestic wheat market in Aug-Oct

Reuters

MOSCOW, March 14 (Reuters) - Russia plans to buy wheat on the domestic market in the August-October period to replenish stocks after last year's drought, an agriculture ministry official said on Thursday, a move seen bringing more risks for the country's exportable surplus.

If the government ends up competing with exporters for grain, it could jeopardise Russia's traditional role as one of the cheapest suppliers on the world market, typically attracting interest from price-sensitive buyers in north Africa and the Middle East.

Russia is looking to rebuild depleted stocks after a drought last year which slashed its wheat crop by a third. The country's restocking plan would set a bottom price for the new harvest, traders and analysts said previously.

The government is aiming for a starting price band of 6,000-7,000 roubles ($190-$230) per tonne, and the total volume of purchases will depend on the 2013 grain harvest, Deputy Agriculture Minister Ilya Shestakov told reporters on the sidelines of a sugar conference in Moscow.

The government could buy about 6 million tonnes of grain this year, mainly wheat and maize (corn), the head of IKAR think-tank Dmitry Rylko told reporters on Thursday.

Since the start of this season, the government has sold 2.2 million tonnes of grain from its grain stocks, known as its intervention stocks, and plans to sell an additional 2.3 million tonnes by July. This will decrease its stock to about 300,000 tonnes.

Scenarios for this year's crop and restocking plan will be discussed during a meeting between Deputy Prime Minister Arkady Dvorkovich and other officials on Monday, Shestakov said.

The damage to Russia's 2012 crop generated a huge premium for old wheat crop supplies versus new crop.

Some traders have already bought Russia's new crop wheat at $265-$275 a tonne on a free-on-board (FOB) basis for deep-water ports in Russia's South, SovEcon agricultural analysts said previously. Current prices were seen at $350 in the region.

One European trader stressed that a price in the $190-$230 per-tonne range in the procurement regions would equate to $250-$290 on a free-on-board basis.

The government is targeting a 2013 grain harvest of 95 million tonnes, up from last year's 71 million, which the country needs to cover domestic demand, to replenish stocks and to sustain an exportable surplus.

Some officials, lobbies and analysts expect the crop to fall short of the government's target.

IKAR forecast on Thursday that Russia's 2013 grain crop would be around 90-92 million tonnes, including 50 million tonnes of wheat.

A harvest of that size would leave about 20 million tonnes of grain for potential exports in 2013/14.

This season's nominal exportable surplus has already been exhausted, with exports running at just over 14 million tonnes to date. ($1 = 30.7927 Russian roubles)

14.03.13

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