Russian wheat exports loom, may pressure prices

Russia is likely to resume wheat exports later this year which will add to the global surplus of the grain, putting pressure on international prices, a US-based agriculture consultant said on Tuesday. Russia, typically the world's third largest wheat exporter, banned overseas grain sales last year after a devastating drought ravaged the Black Sea region, pushing wheat prices higher on the benchmark Chicago Board of Trade.
Although it is difficult to quantify the volumes that are expected to hit the market from Russia, the nation will take small steps in easing export curbs, said Emily French, managing director of ConsiliAgra, a US-based consultancy and brokerage. "Just the mere fact that they are exporting is bearish, anything from zero is going to be bearish," she told Reuters on the sidelines of an industry seminar in Singapore.
"Exports are going to be very steady. It is going to be controlled initially as they are going to manage it." The worst drought in a century killed a third of Russia's crop last year, slashing the harvest to just 61 million tonnes, sending food prices soaring and prompting the government to ban grain exports from August 15, 2010 to at least July 1, 2011.
Russia's Agriculture Ministry said earlier it would consider lifting the export ban only after the size of this year's harvest is known in late September or October, adding that Russia requires 85-87 million tonnes to cover its own needs. The ministry, which allowed only flour exports starting in January, forecast a 2011/2012 harvest of up to 90 million tonnes.
CBOT December wheat contract, which was trading at $9.28-1/4 a bushel on Tuesday, is overvalued, French said. "The US is going to roll a sizeable export book forward and we see Black Sea exports in 2011/12, definitely," she said in an interview. "The soft wheat market is shifting to become a buyer's market and $9 for December wheat looks very overvalued."
Although the global supply of wheat remains sufficient, logistical complications from the Russian export ban, which prompted Middle Eastern and North African countries to import from Europe and the United States, pushed prices up. French said any move India makes to ease wheat export ban is also likely to weigh on prices.
"They have so much wheat and any move like the Black Sea region India makes is going to be bearish." Indian wheat reserves swelled to 17.2 million tonnes by March 1, more than double a government target of 8.2 million tonnes. That, combined with forecasts of a record harvest of 84.3 million tonnes in 2011, has prompted industry and trade to demand that export curbs be lifted.