Agro Perspectiva

Russia Targets Asia With Cheapest Wheat After Lifting Putin’s Export Ban

03.08.2011 11:04 "Agro Perspectiva" (Kyiv) — Russia, the world’s second-biggest wheat exporter before halting sales last year, is offering the largest discount on the grain in at least four years and targeting buyers in Southeast Asia to regain its share of the world market after lifting an export ban a month ago. Russian wheat costs at least $40 a metric ton less than North American, French or Australian supplies, according to the Moscow-based Institute for Agricultural Market Studies researcher, also known as IKAR. That makes shipping to countries such as Malaysia viable after freight rates fell 44 percent in the past 12 months. Russia’s grain exports in July probably rose to 2 million tons, the highest monthly shipments on record, according to IKAR and Moscow-based agriculture researcher SovEcon. Exports to long-haul destinations such as Southeast Asia and southern Africa may reach as much as 1 million tons in the 12 months that end June 30, compared with the previous record of 650,000 tons in the 2009–2010 season, according to IKAR. «Russia is offering such a big discount that it allows the grain to travel these crazy distances,» said Dmitry Rylko, director of IKAR. «Buying Russian wheat may be cheaper than Australian.» Russia, the world’s second-largest wheat exporter behind the U.S. in the 12 months ended June 30, 2010, fell to eighth in the following period as exports slumped 79 percent to 3.9 million tons, data from the International Grains Council show. The outlook for Russia’s wheat production in the 12 months through June next year was raised by 2 million tons to 56 million tons, the IGC said July 28, increasing its June 30 forecast. Russia is expected to ship 13 million tons of the grain in the 12 months that end June 30, the IGC said. Aston FFI, a Lausanne, Switzerland-based unit of grain and oilseed producer and exporter OAO Aston, is in talks to ship wheat to Vietnam and Malaysia, and is «aware» of similar discussions by other Russian traders, said Peter Biermann, general manager of grain export operations. Aston also sold wheat to Kenya and Mozambique, he said. Aston says it accounts for 10 percent of Russian cereal exports. «In former years those markets were served by cheaper origins, might it be the U.S., might it be Argentina, might it be Australia,» Biermann said. «This year everything is different. Clearly it’s the price of Russian wheat which is unbeatable at the moment, at least.» The distance between Russia’s southern port of Novorossiysk, the main grain export hub, and Ho Chi Minh City in Vietnam is 6,900 nautical miles (7,940 miles), according to e- ships.net website. Egypt, the world’s biggest importer, bought 720,000 tons of Russian grain since the ban was lifted, while Jordan and Tunisia also made purchases, according to tender results. Egypt had dropped Russia from its list of approved sources after the eastern European country imposed its ban, according to the country’s state wheat buyer. The northern Africa nation agreed to buy 120,000 tons of Russian milling wheat for $249.47 to $250.40 a ton on July 26. November-delivery milling wheat traded on NYSE Liffe in Paris was at the equivalent of $283.27 a ton at 4:10 p.m. local time today. «They are aggressive,» said Jack Watts, a senior analyst at the U.K.’s Agriculture and Horticulture Development Board, an industry group funded by farmers. In the Egyptian tender «they were $35 cheaper than the nearest competitor, France.» Russian grain is gradually becoming more expensive for importers. Egypt paid as much as $255.25 a ton for Russian wheat at a July 29 tender, up from $243.50 on July 7, when it bought the grain for the first time after the Russian ban expired. «We still have a couple of months to sell at extra-long distances,» IKAR’s Rylko said. «It’s impossible to sell grain so cheap for a long period of time.»