Friday, September 10, 2010

Russia Lowers Grain Forecast Again, May Sell From Reserves After Drought

Bloomberg reports that Russia cut again its grain-harvest forecast for this year and plans to sell from stockpiles if domestic prices rise in 2011.

The harvest will be 60 million metric tons this year or “possibly slightly more,” Deputy Agriculture Minister Sergei Korolyov told a conference in Moscow today. His estimate lowered the upper end of the ministry’s forecast, which had been 65 million tons.

Russia imposed a ban on grain exports, which Prime Minister Vladimir Putin said Sept. 2 will last at least until next year’s harvest, after the country’s worst drought in at least 50 years. The heat wave caused the government to slash the grain-crop forecast from the original estimate of 97.1 million tons, the same as last year’s output.

“If after the New Year, prices go up, the government will stamp this out through its intervention fund,” Korolyov said, referring to the 9.5 million tons of stockpiles accumulated in previous years to support farmers. “The government won’t allow prices to rise.”

The export ban, originally enforced from Aug. 15 to Dec. 31 to ensure domestic supplies, may be extended until November 2011, as the country normally completes its harvest in that month, according to Putin’s announcement.

Russian farmers are stockpiling grain, expecting higher prices, Sergei Levin, head of United Grain Co., the state-run trader, told the same conference.

‘Good Harvest’

Farmers may lose money if they hold on to their grain and the government starts selling from stockpiles, he said.

Russia’s next grain crop can’t be good when exports are banned and farmers have no incentive to plant, said Vladimir Petrichenko , an analyst at trader WJ Group.

“They have to allow exports, then there will be good sowing, then there will be a good harvest,” he said.

Russia was the world’s third-biggest wheat exporter in 2009-10 after the U.S. and Canada, according to the U.S. Department of Agriculture.

Russia may need to import as much as 6 million tons of grain in the current marketing year to meet domestic demand, according to Moscow-based researcher SovEcon.

The Agriculture Ministry said Sept. 2 the nation must produce between 85 million and 90 million tons of grain next year to ensure sufficient domestic supply.

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