Wheat importers buy for fear Russian supply will dry up
LONDON (Reuters) - A global crunch in grain supply intensified on Wednesday with high prices failing to dampen the appetite of consumers while supplies from key exporter Russia appeared to be in danger of running out before the end of the year.
A modest setback in prices early this week has triggered a flurry of tenders by major importers, with Egypt, Algeria and Morocco entering the market, while buyers were also nervous about the availability of Russian supply.
Russia banned grain exports for almost a year after a severe drought two years ago, a move that proved the catalyst for a surge in grain prices and related political instability in the heavily import dependent Middle East and North Africa region.
Agricultural analysis group SovEcon said on Wednesday that Russia's exportable grain surplus of 10 million to 11 million metric tons could run out by November if the country kept up a high pace of exports in coming months.
The tightness in Russian supplies, after drought caused a sharp drop in yields this season, had led to talk that the government may impose export restrictions with quotas, tariffs or even an outright ban.
Russian Deputy Prime Minister Arkady Dvorkovich said last week that Russia had no grounds to ban grain exports but did not rule out protective export tariffs after the end of the 2012 calendar year.
"A lot of people are finding it hard to believe the Russians would dare to do another ban," said Wayne Bacon, president of grain trader Hammersmith Marketing.
"We're seeing some countries with a bit of fear and wanting to build up some stocks in case something happens, but on the whole, given high prices, most governments are buying hand-to-mouth," he added.
Russian ministry data obtained by Reuters on Wednesday showed grain yields have fallen 28.6 percent from last year with the harvest almost at its mid-point.
Any curtailment on shipments from Russia is likely to see some demand shift to neighboring Ukraine but the outlook for exports there also appears to be diminishing.
Ukraine's grain exports will not exceed 1.2 million metric tons in August, the same volume as in July, Agriculture Minister Mykola Prysyazhnyuk said on Wednesday.
Prysyazhnyuk said high local prices prevented traders from making large purchases of Ukrainian grains.
Egypt, the world's largest wheat buyer, bought 120,000 metric tons of wheat from Russia and Ukraine on Tuesday after purchasing the same quantity on Saturday, on that occasion exclusively of Russian origin.
Algeria's state grains agency OAIC bought 500,000 metric tons of durum wheat in August, mostly from Canada, due to a weak domestic harvest, the official APS news agency quoted a senior OAIC official as saying.
The authorities had said in June the country would not need to import durum wheat or barley until the end of 2012. Large durum wheat imports have been prompted by prospects that the local harvest would be insufficient to cover needs for early next year.
"National output will be enough (to meet needs) until January 10. Beyond this date, we will have consumption needs to meet through imports," said Hakim Chergui, director of foreign trade at OAIC, without giving a figure.
Morocco's state-run grains authority ONICL said on Wednesday it has received no bids in its tender to buy up to 300,000 metric tons of European Union-origin soft wheat as part of a preferential tariff agreement.
Global corn and wheat prices rose about 50 percent in the six weeks up to the end of July and soybeans by around 20 percent as U.S. crops were scorched by heat and drought.
(Additional reporting by Polina Devitt in Moscow, Hamid Ould Ahmed in Rabat, Sarah McFarlane in London and Pavel Polityuk in Kiev; Editing by Anthony Barker)