No sign of Russia grain intervention as prices dip

There is little sign yet of Russia’s government stepping in to support wheat prices, despite them falling below levels meant to trigger intervention buying – signalling further boom times for grain merchants.

A fall in wheat prices of some 400-500 roubles a tonne in a week has driven prices in some areas, such as the Black Earth region and Volga Valley, below government thresholds for supporting the market, Andrey Sizov, the managing director of consultancy SovEcon said.

"Prices have fallen lower than the levels set by the agriculture ministry in March for intervention buying," Mr Sizov said, with the thresholds set at 5,000 roubles ($178) a tonne for third-grade milling wheat and 4,650 roubles ($165) a tonne for fourth-grade in the European part of the country.

However, there is "no sign so far" of the government initiating intervention buying, which is "not something that can be set up in just one week".

"You have to organise elevators, sort out which agricultural producers are allowed to submit grain. It all takes time," Mr Sizov told Agrimoney.com.

‘Prices to decline’

The lack of support looks set to weaken further domestic grain prices, which are being depressed by farmers’ need to raise funds to pay for autumn sowings, after their finances were sapped by drought last year, besides by seasonal harvest pressure.

"The harvest is not even past the half-way mark. We will see grain from more regions coming to the market. I expect domestic prices to continue to decline," Mr Sizov said.

Meanwhile, the prices garnered by Russia’s grain on export markets are continuing to grow, offering widening margins for merchants.

Egypt, which has bought 720,000 tonnes of Russian wheat in less than a month, paid nearly $255 a tonne for its latest batch, purchased on Friday – up by $5 a tonne in three days, and by more than $8 a tonne since mid-July.

Record exports ahead?

Furthermore, merchants are enjoying bumper volumes too, with shipments last month hitting 2m tonnes according to SovEcon, a record for July.

Russia’s state grain inspection data on Wednesday showed the figure at 2.4m tonnes, although this may have included grain not shipped until August, Mr Sizov said.

Separately, Arkady Zlochevsky, the head of the Russian Grain Union industry group, forecast that grain exports – mainly wheat – in August could reach 3.5m tonne, beating an all-time high for any month of 3.2m tonnes.

While exports often pick-up later in the summer, as extra harvest volumes come on tap, Mr Sizov declined to comment on the RGU forecast.

Further insight into Russian grain trading may be offered on August 25, when Glencore, whose commodity empire includes significant grain operations in the country, presents half-year results.

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