Russia Record Grain Prices May Slow Exports, SovEcon Says

Russia, the world’s third-biggest wheat exporter last season, won’t ship grains at the start of the 2013-14 marketing season at the same pace as in recent years because of record domestic prices, SovEcon said.

“Large traders don’t sell new crop contracts now, as they used to do in previous seasons at this time of year,” Andrey Sizov Jr., managing director of the Moscow-based agriculture researcher, said today in a phone interview. “Traders don’t have a clear understanding if they will be able to execute the contracts.”

Domestic grain prices made exports unprofitable in the second part of the current season, which ends June 30, according to SovEcon. Prices probably won’t fall ahead of harvesting of the new crop, which may begin in June, as its prospects are unclear because of a lower-than-average winter crop condition, Sizov said.

Russia, which has a grain export potential of 30 million metric tons a year, according to an Economy Ministry estimate, has never reached that level because of market conditions, weather difficulties or inadequate technology. The country achieved record exports of 27.2 million tons last season, according to ministry data. Shipments may exceed 14 million tons in 2012-13 and imports may be above 2 million tons, Sizov said.

First Contracts

A less optimistic outlook for the new crop is increasing uncertainty for traders in judging the size of initial contracts in the new season, according to Sizov.

“There are less hopes for having a high crop,” he said. “At best, it may be average.”

If the harvest is near average at 85 million tons next season, exports may be 15 million tons, Sizov said.

Russia harvested 70.7 million tons of grain in 2012-13, or 25 percent less than a year earlier, after drought last summer, according to the state statistics data. SovEcon estimated the new crop at 81 million to 87 million tons in December. The estimate may be reduced if winter crops are seen in worse condition at the end of February than they were in autumn, Sizov said.

The Agriculture Ministry estimated today that winter crop losses came to 9.5 percent on 1.5 million hectares (3.7 million acres) and the projection may apply to 2 million hectares, spokesman Evgeny Pavelko said in a text message, citing a report by Pyotr Chekmarev, head of the ministry’s planting department.

Export Estimate

Chekmarev assessed the potential crop at 95 million tons and exports at 15 million to 20 million tons in 2013-14, Pavelko said.

The ministry’s estimates are “extremely optimistic,” Sizov said. Winter crops’ condition was “below average” by the start of winter, and more crops may die after December frosts in areas uncovered by snow, he said.

Russia will probably end this season with carryover stocks at levels below 10 million tons, which is close to the record minimum registered in 2007-08 at below 8 million tons, he said.

Wheat for March delivery rose 0.5 percent to $7.8125 a bushel on the Chicago Board of Trade by 7:32 p.m. Moscow time.

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