Russia may extend grain export ban
Kiryl Sukhotsky and Aleksandras Budrys
Russia, grappling with its worst drought on record, warned on Monday
that its ban on grain exports could extend into 2011 and that the
intense heat threatened to stall seeding for next year’s harvest.
A woman walks past burning grass near the village of
Polyaki-Maydan in Ryazan region, southeast of Moscow, August 9,
2010. Reuters |
Effects of the drought that has decimated supply from the world’s No.
3 wheat exporter have reverberated across the globe, sending prices of
wheat to their highest level in about two years despite comfortable
global supply levels.
Major suppliers canceled deals to ship as much as 200,000 tons of
Black Sea wheat to Bangladesh after Russia said last week it would ban
grain exports from August 15 to December 31. Dealers expect more such
cancellations to follow, forcing importers to seek supplies from other
countries.
On Monday, Russian Prime Minister Vladimir Putin said the ban could
extend beyond 2010 and noted that grain production could drop to 60
million tons, below the latest forecast from the country’s agriculture
ministry of 65 million.
“If someone is waiting for December 31, he is waiting in vain. A
decision may be taken only after the harvesting campaign results are
clear,” he told a Government meeting. He also said key grain growing
regions in Russia were unable, and will not be able, to begin winter
seeding. The winter wheat crop is usually harvested the following
summer.
The news from Putin helped to lift wheat prices in Europe, which fell
sharply at the open as did prices at the Chicago Board of Trade on
follow-through selling from Friday.
Benchmark November milling wheat on Euronext rose 3.75 euro, or 1.8
percent, to close at 213.25 euros a ton.
In Chicago, September wheat fell 13-1/4 cents, or 1.8 percent, to
$7.12-1/2 a bushel. But July, the first month to reflect prices for next
year’s crop, rose 11-1/2 cents, or 1.6 percent, to $7.14-1/2.
Firefighters battled wildfires covering 1,740 square km (672 sq
miles) in what the state weather forecaster said was Russia’s worst heat
wave for a millennium.
The intense heat and smoke have nearly doubled death rates in Moscow,
a city official said on Monday, as a shroud of smog from the raging
forest and peat fires beset Russia’s capital for a third week.
Analysts SovEcon estimated on Monday that Russia’s wheat crop could
fall by nearly a third to 43.5 million tons and that the export ban was
likely to be extended into 2011.
The crop estimate was well below the consensus in a Reuters snap poll
on August 5 of 46.5 million tons. SovEcon forecast Russia’s wheat
exports in 2010/11 may be around 3 million tons, plunging from the 18
million tons the International Grains Council estimated were shipped in
2009/10 when it was the world’s number three exporter.
“The ban (on grain exports) will most likely be extended into the new
year,” SovEcon said, adding an expected decline in barley production
would increase the demand for wheat to produce animal feed in the
regions hit by drought.
In neighbouring Ukraine, the world’s sixth-largest wheat exporter in
the 2009/10 season, analysts and officials cut crop and export
forecasts.
“Wheat yields are lower than we expected before because of the very
hot weather,” Elizaveta Malysh from UkrAgroConsult told Reuters.
A senior Ukrainian Farm Ministry official said this year’s wheat
harvest could fall to about 17 million tons, below the consensus in a
Reuters poll last week of 18.1 million and down from 20.9 million in
2009.
Trade and shipping sources said an informal system of customs
controls in Ukraine is causing serious delays to Ukrainian wheat
exports.
“There is widespread belief in the market that Ukraine is undertaking
some deniable form of export slowdown,” a trader said. Reuters
Contracts cancelled
Vice Chairman of the General Authority for Supply Commodities,
Egypt’s main state wheat buyer Nomani Nomani, said Russia had agreed to
review and reschedule previously contracted wheat supplies to Egypt in
October in view of the export ban.
Egypt, the world’s largest wheat importer, had signed contracts for
540,000 tons of wheat from Russia for delivery between August 1 and
September 10.
GASC, in its tender set on Friday, did not seek offers of wheat from
Russia, Ukraine and Kazakhstan as it has in the past. On Saturday, it
bought 240,000 tons of French wheat.
The drought could also force Russia to cut beet sugar output to 3.2
million-3.5 million tons from an earlier expected record 4 million,
Andrei Bodin, chairman of lobby group the Russian Sugar Producers’
Union, told Reuters Insider in an interview.
Russia is a net importer of sugar, although it has bought less in
recent years as increased domestic production and variable import
tariffs pushed it down to the world’s number three sugar buyer from the
top spot.
Russia set its previous beet sugar refining record in 2008, when it
refined 3.5 million tons from that year’s harvest. The crop declined to
3.2 million tons in 2009 as farmers cut the area sown to sugar beets. |