Growth in demand for Russia grain causes sharp fall in US

NEW YORK, August 5 (Itar-Tass) — High demand for Russian grain could weaken the US position as a leading world exporter of wheat. On Thursday, the Chicago Board of Trade completed work with a sharp fall in wheat prices in response to Russia’s successes on the grain market.

Egypt – the world’s largest importer of wheat – reached an agreement Thursday with Russia on the supply of 180,000 tonnes of grain. The price for a tonne ranges between 261.94 and 262.50 US dollars. It is much cheaper than the sum paid by Cairo for grain from the United States. Earlier, US producers offered foreign customers wheat at 275.30 US dollars per tonne.

The deal forced American exporters to lower prices on their products. By the end of the day contracts for the supply of wheat in September fell on the Chicago Board of Trade by 29 cents and were concluded at the rate of 6.82 dollars per bushel (27.3 kg), i.e., 249.81 US dollars per ton. December futures fell 25 cents (3.3 percent) down to 7.25 US dollars per bushel, the sharpest drop since June 30, when it became known that Russia is ready to lift the embargo on grain exports. Since the beginning of the year, the price of American wheat has fallen by 5.6 percent, experts stress. They also noted that export prices because of duties differ from those that are offered on the domestic market.

“Russia is playing the game of dumping their wheat in the export market, and US exports are going to struggle,” Darrell Holaday, the president of Advanced Market Concepts in Wamego, Kansas, told the Bloomberg agency in a telephone interview. “At these prices, I’m not optimistic.”

Wheat futures dropped the most in five weeks on signs that importers favour cheaper Russian grain, reducing demand for supplies from the US, the world’s top exporter.

Egypt, the largest importer, bought 180,000 metric tons from Russia in a tender today at $261.94 and $262.50 a ton. As of July 22, US soft wheat for export traded at $275.30 a ton. On July 1, Russia lifted a ban on grain shipments imposed after a drought damaged last year’s crop, according to Bloomberg.

Wheat futures for December delivery fell 24.5 cents, or 3.3 percent, to close at $7.255 a bushel at 1:40 p.m. on the Chicago Board of Trade, the biggest drop since June 30. The most-active contract has declined 8.7 percent this year.

Russia may export 20 million to 25 million tons of grain this season. The country had been the world’s second-largest exporter until the most-severe drought in 50 years cut production in 2010.

Russia lifted an embargo on grain exports on July 1. On July 14, RF Deputy Prime Minister Viktor Zubkov said that for this year the country expects to harvest 90 million tons of grain, significantly more than the initial estimates of experts. According to observers, this year alone, Russia will export some 20 million tons of grain.

Wheat is the fourth-largest US crop, valued at $13 billion in 2010, behind corn, soybeans and hay, US government data show.

The Russian Grain Union expects 89-92 million tonnes of grain to be harvested in the country this year. “The situation has been quite favourable so far,” Russian Grain Union Vice-President Alexander Korbut said last month. Wheat crop alone reach about 58 million tonnes.

Earlier, First Vice Prime Minister Viktor Zubkov quoted experts as projecting a crop of 90 million tonnes in 2011, including 17 million for barley (6.5 million tonnes last year), and 850,000 tonnes for buckwheat (330,000 in 2010).

Agriculture Minister Yelena Skrynnik confirmed that Russia expects to harvest more buckwheat this year and there are no reasons for its price to grow. “There was a speculative outburst last year. If it continues, the Federal Antimonopoly Service must interfere. This is its duty,” Skrynnik told Itar-Tass on Monday, July 25, after a meeting on the situation on the grain market, which was chaired by President Dmitry Medvedev. “[Buckwheat] production volumes are sufficient to meet all needs,” she added.

Zubkov said 850,000 tonnes of buckwheat would be harvested this year. “In 2010, we had 350,000 tonnes and prices were hyped up to over 100 roubles per kilogram,” he said. Korbut also expects grain prices to fall on the world markets. “Even with stable prices for Russian grain, purchasing prices will most likely decrease,” he said. He believes that “this is a very serious challenge for the government and the grain business in general.”

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