Russian Grain Exports May Halve as Drought Worsens

Russia’s driest summer in more than a century may halve grain exports and drive gains in wheat prices, which are already accelerating more quickly than during the 2008 food crisis, reported “Kazakh-Zerno” IA with reference to the “Businessweek“.

Russian grain exports may fall as low as 11 million metric tons in the marketing year that started July 1 under a “worst- case scenario,” from 21.5 million tons last year, the country’s Grain Union said in an e-mailed presentation today. Exports will likely come to 14 million tons under a “normal” scenario, it said.

Russia is struggling with the worst drought since record- keeping started 130 years ago. Twenty-seven crop-producing regions have declared emergencies, and the Agriculture Ministry said it will cut its grain-crop forecast from 85 million tons. The harvest may fall as low as 72 million tons if the drought persists and will likely come to about 75 million tons under a “normal” scenario, according to the Grain Union.

Outbound wheat shipments may decline to 9.5 million tons, from 18.3 million tons, the Institute for Agricultural Market Studies said last week. Russia may export about 13 million tons of wheat and as much as 1 million tons of barley, according to International Grain Co., the local unit of Glencore International AG. Russia exported 2.8 million tons of barley in the last marketing year.

Shipments From Russia

Russian grain exports may come to 14 million tons, including 12.5 million tons of wheat, according to Ratzebrug, Germany-based researcher F.O. Licht.

“Russian exports will certainly be down, but the higher price is going to bring more wheat into the market,” Licht analyst Keith Flury said by telephone today.

The Grain Union urged Russia’s government to accelerate sales of stockpiled grain in drought-stricken regions to curb the domestic price rally. The government delayed an earlier plan to start selling stockpiled grain Aug. 4. The union gave no definition of the weather conditions that constituted its “normal” and “worst-case” scenarios.

Domestic wheat prices are rising more quickly than during the 2008 global food crisis, the Grain Union said. Russian milling wheat surged as much as 19 percent last week, according to researcher SovEcon. The grain may rise to $300 a metric ton “shortly” in Russia, said Valars Group, the country’s third- biggest grain trader.

“The drought continues to worsen,” Pavel Skurikhin, president of the National Grain Producers’ Union, said by phone today. The union forecasts a grain crop of between 72 million and 77 million tons. Siberia, which may harvest about 15 million tons of grain this year, will create stockpiles to aide drought- stricken areas, Skurikhin said.

Grain prices will likely rise more slowly in coming weeks as levels of 5,500 to 6,000 rubles provide “sufficient” margin for farmers, Skurikhin said.

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