PRESS: Exporters of Russian wheat stop purchases over high duty

MOSCOW, Apr 13 (PRIME) -- Large companies, unready for a U.S. $59 per tonne export duty, stopped buying Russian wheat for exports and are waiting for the local wheat prices to fall ahead of the new harvest, Kommersant business daily reported on Tuesday quoting sources.

A new mechanism of the duty will reduce the duty to $21 per tonne if the price is $230 per tonne on June 2. But this situation creates the risk of companies failing to buy enough wheat, as Russia’s wheat reserves are low, Andrei Sizov, director of agricultural research agency SovEcon, told Kommersant.

A source told the business daily that Louis Dreyfus, KZP, Bunge, and Sierentz Global Merchants have virtually left the market. Other sources said that Cargill and Gemcorp also suspended purchases. Dmitry Rylko, CEO of the Institute for Agricultural Market Studies, said that only United Grain Company and a couple of other firms continue buying grain under contracts signed at larger prices.

Eduard Zernin, head of the Union of Grain Exporters, said that the bulk of exporters are not rushing with purchases. Producers and resellers are waiting for the duty to be cancelled and unwilling to include it in the price. This persistence will lead to a price slump instead of their gradual contraction when it is necessary to free the grain elevators for a new harvest, he told Kommersant.

SovEcon says the average free-on-board price for Russian wheat with a protein content of 12.5% fell by $4 to $244 per tonne, with the local prices for third-class wheat falling by 75 rubles to 13,550 rubles per tonne.

An Agriculture Ministry representative said that the major reason for suspension of purchases is expectations that the internal wheat prices will fall prior to the new crop, as the factor of duties has already been priced in. The proof of that is the fact that exporters won five out of six lots at the latest auction of Egypt’s General Authority for Supply Commodities.

The ministry thinks that Russia will remain the world’s leading wheat exporter. The customs say that Russia’s exports grew by 22% on the year to 39.1 million tonnes of grain, with wheat exports rising 17% to 32.4 million tonnes in the current season, Kommersant reported quoting the representative.

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