MOSCOW, Russia (Reuters) — Russia plans to buy wheat on the domestic market in the August-October period to replenish stocks after last year’s drought.
The move is seen bringing more risks for the country’s exportable surplus.
If the government ends up competing with exporters for grain, it could jeopardize Russia’s traditional role as one of the cheapest suppliers on the world market, typically attracting interest from price-sensitive buyers in North Africa and the Middle East.
Russia is looking to rebuild depleted stocks after a drought last year slashed its wheat crop by a third. The country’s restocking plan would set a bottom price for the new harvest, traders and analysts have said.
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The government is aiming for a starting price band of $190-$230 per tonne, and the total volume of purchases will depend on the 2013 grain harvest, said deputy agriculture minister Ilya Shestakov.
The government could buy six million tonnes of grain this year, mainly wheat and corn, said Dmitry Rylko, head of the IKAR think-tank.
The government has sold 2.2 million tonnes of grain from its grain stocks, known as its intervention stocks, since the start of the season and plans to sell an additional 2.3 million tonnes by July. This will decrease its stock to 300,000 tonnes.
The damage to Russia’s 2012 crop generated a huge premium for old wheat crop supplies versus new crop.
Some traders have already bought Russia’s new crop wheat at $265 to $275 a tonne on a free-on-board basis for deep water ports in southern Russia, SovEcon agricultural analysts have said. Current prices were seen at $350 in the region.
One European trader stressed that a price in the $190-$230 per tonne range in the procurement regions would equate to $250 to $290 on a f.o.b. basis.
The government is targeting a 2013 grain harvest of 95 million tonnes, up from last year’s 71 million, which the country needs to cover domestic demand, replenish stocks and sustain an exportable surplus.
Some officials, lobbies and analysts expect the crop to fall short of the government’s target.
IKAR recently said Russia’s 2013 grain crop would be 90 to 92 million tonnes, including 50 million tonnes of wheat.
A harvest of that size would leave 20 million tonnes of grain for potential exports in 2013-14.
This season’s nominal exportable surplus has already been exhausted, with exports running at slightly more than 14 million tonnes to date.
