6 August 2010
Russia, the world’s third largest grain exporter in 2009, suspended grain exports in August 15-December 31, 2010 in order to stabilize domestic prices as the summer drought lowered the forecasted 2010 harvest to 70 mln mt (28% below earlier estimates), Kommersant reported this morning. As a result, US Gulf wheat spot prices surged 5.2% d-o-d to USD 271/mt (+45% y-o-y) to August 2008 levels. Also yesterday, Ukrainian Vice Prime Minister Viktor Slauta said the decision to implement domestic export restrictions are subject to harvested volumes and would be only decided later this year. Ruslan Patlavskyy: We see a low likelihood of Ukraine suspending grain exports, as based on our forecasts the country should be able to harvest 41-42 mln mt (-10% y-o-y) of grain over the 2010/11 season, which, including current grain stocks, implies potential exports of ~15 mln mt (-28% y-o-y). In the meantime, grain prices are likely to grow further, which favors local grain producers, and in particular Kernel Group (WSE: KER PW), traditionally responsible for ~10% of Ukraine’s annual grain exports.