21st Sept 2012, by Agrimoney
Russia may impose grain export curbs after all to quell a rise in domestic prices of the grain, the country's economy minister said, as Russia's continued success in shipments continues to erode supplies.
Andrei Belousov, Russia's economy minister, said it was "quite possible" that the government, which two years ago banned shipments altogether after dryness devastated grains production, would restrict exports of this year's drought-hit crop.
The comments fostered a rise in prices of wheat, Russia's main grain export, which stood 2.0% higher at $8.97 a bushel in Chicago at 17:30 UK time (11:30 Chicago time), while gaining 0.9% in Paris.
And they appeared to put Mr Belusov on a collision course with Deputy Prime Minister Arkady Dvorkovich, who said at the end of August, after a meeting with farm ministers which eschewed trade curbs, that "we consider any export restrictions harmful.
"We will use the instruments we have - market interventions and information exchange with market participants.
"As long as I am in charge of this sector, I will be against any export restrictions."
Separately on Friday, Mr Dvorkovich said that Russia did not plan to impose export curbs.
Price implications
Mr Belusov said on Friday: "The issue of [a] grain exports ban is the issue of domestic grain prices dynamics.
"We are witnessing such a trend at the moment... With such a trend, it's quite possible, that the government will decide to restrict grain exports."
The government will discuss grain exports "this autumn".
Clashes within governments are not uncommon at times of rising grain prices, with agriculture ministers often seeking to protect the interests of farmers, for which high prices may offer compensation for a poor crop.
Meanwhile, economy ministers, attempting to keep a lid on inflation, often pursue action to depress food prices or, as in Ukraine last year, opportunities to raise revenues through export levies.
Rising prices
Prices of Grade 3 wheat stood at 8,450 roubles a tonne as of a week ago, up 28% on values at the start of June, before US, and then former Soviet Union, droughts sent world grain prices soaring.
The rises have been underpinned by weak inventories left over from last year's campaign, with inventories held by farmers starting August at their lowest in nine years.
The price of Grade 4 wheat, the typical export grade, was 8,425 roubles a tonne, a gain of 30% over the same period.
However, with values of foreign grain rising too, the increases, while cutting the discount of Russian wheat exports compared with rival supplies, has not eliminated it entirely, with the country on Wednesday winning a 150,000-tonne order from Iraq against international competition.
Traders flagged the higher price of some $377 a tonne, excluding freight, that Iraq appears to have paid, compared with the values of $320-350 a tonne paid by Egypt at tenders undertaken earlier, but also for November shipment.
The Iraq price "is going to provide some very tough competition in the interior" for any merchants which have yet to source grain for Egypt, Swiss-based analysis group Fryer said.
'Soon dry up'
Fryer analysts added, in comments made before Friday's announcement: "We now suspect that unless there is a clear mandate from the [Russian] government that allows sales into November," implying that any curbs might not be go live until late in the year.
Even so, it may be too late for buyers to source large quantities of the grain ahead of any curbs, with logistics at Russia's main Black Sea port already appearing tight, given the three ships bound for Iraq to load, besides 13 panamax cargos to Egypt in the October-to-November timeframe.
The fate of Russia's exports is being closely watched given that their decline will shift demand from importers to other origins, notably European and North American supplies.
At UK grain merchant Gleadell, trading manager Jonathan Lane said: "Black Sea wheat offers will soon dry up, Southern hemisphere wheat production is forecast 10m tonnes lower than last year, and a tighter EU surplus is seen replacing declining Black Sea exports."
Russia may impose grain export curbs after all to quell a rise in domestic prices of the grain, the country's economy minister said, as Russia's continued success in shipments continues to erode supplies.
Andrei Belousov, Russia's economy minister, said it was "quite possible" that the government, which two years ago banned shipments altogether after dryness devastated grains production, would restrict exports of this year's drought-hit crop.
The comments fostered a rise in prices of wheat, Russia's main grain export, which stood 2.0% higher at $8.97 a bushel in Chicago at 17:30 UK time (11:30 Chicago time), while gaining 0.9% in Paris.
And they appeared to put Mr Belusov on a collision course with Deputy Prime Minister Arkady Dvorkovich, who said at the end of August, after a meeting with farm ministers which eschewed trade curbs, that "we consider any export restrictions harmful.
"We will use the instruments we have - market interventions and information exchange with market participants.
"As long as I am in charge of this sector, I will be against any export restrictions."
Separately on Friday, Mr Dvorkovich said that Russia did not plan to impose export curbs.
Price implications
Mr Belusov said on Friday: "The issue of [a] grain exports ban is the issue of domestic grain prices dynamics.
"We are witnessing such a trend at the moment... With such a trend, it's quite possible, that the government will decide to restrict grain exports."
The government will discuss grain exports "this autumn".
Clashes within governments are not uncommon at times of rising grain prices, with agriculture ministers often seeking to protect the interests of farmers, for which high prices may offer compensation for a poor crop.
Meanwhile, economy ministers, attempting to keep a lid on inflation, often pursue action to depress food prices or, as in Ukraine last year, opportunities to raise revenues through export levies.
Rising prices
Prices of Grade 3 wheat stood at 8,450 roubles a tonne as of a week ago, up 28% on values at the start of June, before US, and then former Soviet Union, droughts sent world grain prices soaring.
The rises have been underpinned by weak inventories left over from last year's campaign, with inventories held by farmers starting August at their lowest in nine years.
The price of Grade 4 wheat, the typical export grade, was 8,425 roubles a tonne, a gain of 30% over the same period.
However, with values of foreign grain rising too, the increases, while cutting the discount of Russian wheat exports compared with rival supplies, has not eliminated it entirely, with the country on Wednesday winning a 150,000-tonne order from Iraq against international competition.
Traders flagged the higher price of some $377 a tonne, excluding freight, that Iraq appears to have paid, compared with the values of $320-350 a tonne paid by Egypt at tenders undertaken earlier, but also for November shipment.
The Iraq price "is going to provide some very tough competition in the interior" for any merchants which have yet to source grain for Egypt, Swiss-based analysis group Fryer said.
'Soon dry up'
Fryer analysts added, in comments made before Friday's announcement: "We now suspect that unless there is a clear mandate from the [Russian] government that allows sales into November," implying that any curbs might not be go live until late in the year.
Even so, it may be too late for buyers to source large quantities of the grain ahead of any curbs, with logistics at Russia's main Black Sea port already appearing tight, given the three ships bound for Iraq to load, besides 13 panamax cargos to Egypt in the October-to-November timeframe.
The fate of Russia's exports is being closely watched given that their decline will shift demand from importers to other origins, notably European and North American supplies.
At UK grain merchant Gleadell, trading manager Jonathan Lane said: "Black Sea wheat offers will soon dry up, Southern hemisphere wheat production is forecast 10m tonnes lower than last year, and a tighter EU surplus is seen replacing declining Black Sea exports."
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