Russian grain sales will get off to a slow start from Friday, when it returned to the global market as a grain exporter after an absence of nearly a year, as buyers appeared in no hurry to snap up supplies. The appetite for Russian wheat will eventually return as stocks dwindle in key importing countries in north Africa and the attraction of its comparatively low prices overcomes any residual reluctance to purchase supplies.
"Everybody expects us to start dumping grain and nobody is ready to buy our grain at international prices," Arkady Zlochevsky, president of the powerful grain lobby, the Russian Grain Union, told reporters this week. Russia, previously the world's third-largest grain exporter, imposed a ban on grain exports last August to stabilise domestic prices after the country's worst drought in more than a century.
Uncertainty over the possibility that the government could impose export duties - if the reopening of the export channel force domestic prices too high - has kept buyers cautious. First Deputy Prime Minister Viktor Zubkov has said Russia might set an export duty on grain if milling wheat prices reached 6,500 roubles ($233.2) per tonne.
"Serious buyers like Egypt and Algeria currently do not believe in Russian imports amid the speculation on export tariffs," a grain trader operating on the Russian market said. The trader said the risks that a duty could be brought in were low as currently EXW prices for fourth-grade milling wheat were around 5,000 roubles per tonne in the south of the country and even lower in the centre, and were still falling.
Egypt, the world's largest wheat importer, excluded Russian wheat from its last international wheat purchase tender on June 23, buying 240,000 tonnes from the United States, France and Australia. "Egypt paid millions of dollars more than it needed to in the June 23 tender, market talk is that the difference is so big that Egypt will accept Russian wheat again soon despite official denials," a European trader said. Some traders said buyers including Tunisia, Lebanon and Jordan were already accepting Russian wheat in their tenders.
WINDOW OF OPPORTUNITY Zlochevsky said the main buyers of Russian grain in north Africa had built up grain stocks to last about half a year, after which Russia will have a window of opportunity to increase exports. The US and European Union stepped up grain exports in the absence of Russia, partly by drawing down stocks, but are less well placed to compete in 2011/12 with drought diminishing the crop potential in western Europe.
Flooding has also reduced their outlook for the US spring wheat crop, making it easier for Russia to win back its customers. "Grain exports by the EU are forecast to fall by as much as one-third, reflecting this year's unchanged harvest and low carry-in stocks," the International Grains Council said in a monthly update issued on Thursday.
The IGC also forecast US grain exports would fall by 5.6 million tonnes in 2011/12 to 82.7 million. Zlochevsky said Russia could increase feed wheat exports if the US find it would be cheaper to produce bioethanol fuel from feed wheat instead of more expensive maize.
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