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Higher wheat prices on the horizon, but exports expected to slow, industry gurus say

Russia’s grain harvest hit a record of 135.4 mln tonnes in 2017

MOSCOW, September 28. /TASS/. Exports prices for wheat that have been rising recently, will rise even higher, while export rates will slow down after climbing to an all-time high in August, experts interviewed by TASS said.

"Export prices are not bad now. We are seeing some hikes now. The ‘deepwater’ port price is $225-226 per tonne of wheat, and heading for $230 per tonne, which is the price target for the coming days, probably by next week," Director General of the ProZerno think tank Vladimir Petrichenko said.

Grain export prices offered by foreign producers are higher than those by Russian companies, he noted. "The French (producers offer - TASS) $240-242 per tonne, meaning there is room for growth," the expert said, adding that he attributes that to high buying activity. Global grain prices hit the ‘local bottom’ in early September, Petrichencko said. "I expected the bottom in August, but it budged slightly because of various reasons, mainly due to the fact that the harvest was moved," he explained. Barley export prices are already high enough, and outstrip wheat prices, the expert added.

Speaking about domestic grain prices, Director General of ProZerno noted that they did not bottom out due to the ruble’s devaluation against the dollar. "On the contrary, we currently see the ruble slightly rebounding as it is strengthening, that is why purchases in ports are stagnating and the price is even backtracking a bit despite the fact that export prices in dollars are on the rise," he said.

According to Vice President of the Russian Grain Union Alexander Korbut, grain prices in Russia are currently stable, while they can backpedal slightly later on and then hover around the average value. "They will shift with the trend to rise over time as the supply of the grain in question will change," he said, adding that it can happen before the end of the year.

Meanwhile, Chief Executive Officer of the Institute for Agricultural Market Studies Dmitry Rylko believes that domestic grain prices are already rising gradually. "This is linked to high global prices and with the fact that there is not that much grain and that it has been taken out quite well, plus this year Belarus joined as a notable importer," he explained.

Export rates

According to Petrichenko, Russian producers exported around 4.7 mln tonnes of grain in September. The current export rates generally outpace last year’s record, he said. "Counting September, (Russia) has exported 14.8 mln tonnes of grain (since the beginning of agricultural year that started on July 1, 2018 - TASS) excluding grain legumes, and over 15 mln tonnes including grain legumes," Petrichencko told TASS. He added that he expects export rates to remain fairly high down the road, though slowing to a level near last year’s figure.

The CEO of ProZerno suggests that export would amount to around 30 mln tonnes in the first half of the 2018-2019 agricultural year. "We are going to have a vintage season when 50-70% of export potential will be taken out in the first half of the season. Last season was not traditional because around half was exported," he noted.

Korbut also expects Russia’s grain export rates to go down. "Currently, export rates are higher, but in my view that rally was artificial to a certain extent, meaning that was a speculative rally by exporters and importers over fears of an export suspension or restriction," he said, adding that the trend subsided when the situation stabilized.

Earlier reports said that Russia’s grain harvest hit a record of 135.4 mln tonnes in 2017. In 2018, the country is expected to harvest 105 mln tonnes of grain, according to the Agriculture Ministry’s data.

On September 18, the ministry downgraded its grain export outlook for the 2018-2019 agriculture year (started on July 1, 2018) to 35-37 mln tonnes from 44-45 mln tonnes announced earlier.