November 6, 2012 / 4:01 PM / in 5 years

Kazakhstan, Germany to cover grain deficit in Russia -lobby

* Russia to face milling wheat, rye deficit -lobby

* German rye exports to Russia tiny in the past-trader

* Kazakhstan to have 2-3 mln T grain free for Russia -AgMin

By Polina Devitt and Robin Paxton

MOSCOW/ALMATY, Nov 6 (Reuters) - Russia’s miller’s union said it has asked the government to ease conditions for importing wheat from Kazakhstan and rye from Germany this spring to cover a shortage after drought slashed grain crops.

Russia, historically the world’s number three global exporter, was hit by hot and dry weather this year, which slashed its wheat harvest by third. Its exportable surplus has already been exhausted.

“It would be appropriate to think in advance about creating attractive conditions for milling wheat imports to Russia (mainly from Kazakhstan) and for rye imports from Germany, which has a good harvest this year,” the union said in a letter to Deputy Prime Minister Arkady Dvorkovich, who oversees the farm sector.

Russia has just completed its harvest, and millers are not currently experiencing a deficit. But milling wheat and rye are likely to run short this spring, the lobby said in the letter, published on its website www.sojuzmuka.ru.

It did not provide specific proposals on the easing of grain imports, nor did it specify how much grain the country might import this season.

In good harvest years, such as 2011/12, Russia imports about 1 million tonnes of grain a year, mainly wheat from Kazakhstan for its border regions in the Urals and Siberia, as well as some top quality milling wheat that Russia cannot supply.

In the current 2012/13 marketing season, which started on July 1, Russia may import 2 million tonnes of grain, the chief executive of SovEcon agricultural analysts, Andrei Sizov, told Reuters on Tuesday.

GERMAN AND KAZAKHSTAN SURPLUS

Germany is the EU’s largest producer of rye, with a harvest of about 3.7 million tonnes in 2012 against 2.5 million tonnes in 2011, according to farm ministry figures.

“Exports of German rye to Russia have taken place in the past but have been tiny or non-existent in the past couple of years when Russia had a good crop. This would be excellent export news and may be another illustration of how tight Russian supplies are,” a German trader said.

Yevgeny Aman, executive secretary at Kazakhstan’s Agriculture Ministry, said Russian buyers were currently unable to compete with relatively high domestic prices for Kazakh wheat.

“Kazakh grain is not yet passable in Russia,” Aman said by telephone.

“Russia has its own volumes but these will dwindle as they are located closer to the sea and will be exported. We may get to the point where Russia, Siberian regions in particular, will feel the need for our wheat.”

According to SovEcon, Russia’s 2012/13 grain exports will reach around 12 million tonnes by the end of November, which exceeds the official estimate of 10 million tonnes for this year’s exportable grain surplus.

In an indication of how tight Russian supplies are, Russia has been conducting market interventions to cool prices but with little effect.

Traders have speculated for months that Russia may restrict exports, as it did in 2010, but Russian officials have said they will oppose any ban on grain exports.

The millers union sees no need to limit grain export, because high domestic prices have already made exports less attractive, it added in the letter.

Grain exports from Russia’s Novorossiisk port are expected to be flat in November versus October, SovEcon said in a note, citing data from firm Transagent. The port is expected to ship 667,000 tonnes of grain, including 536,000 tonnes of wheat in November.

Aman said that Kazakh wheat was trading on the domestic market within a range of 42,000 to 45,000 tenge per tonne ($278.50-$298.37) at the elevator.

Russia’s average domestic EXW (ex-silo) prices for third-grade wheat rose 75 roubles to 9,975 roubles ($310) per tonne last week, which was a new record level in rouble terms.

“Perhaps, when prices level out and the business in Russia feels it can pay the same high prices we do, they will use Kazakh wheat,” Aman said.

Kazakhstan was also affected by drought this year, which slashed its grain harvest to 13 million tonnes by clean weight, but thanks to carryover stocks the country will maintain exports at around 8 million tonnes in the marketing year to June 30, 2013, the ministry has said.

Aman said Kazakhstan’s traditional export markets in Central Asia and Afghanistan would demand 5 million to 6 million tonnes of grain this season, leaving 2 million to 3 million free for export elsewhere.

“This could go to the Russian market or into our carryover stocks,” he said. “Some of our grain is also going to the Black Sea. I know businessmen are selling a little wheat to Europe, plus we have our traditional links with Azerbaijan, Georgia and Iran.”

($1 = 31.6675 Russian roubles)

$1 = 150.82 tenge With reporting by Michael Hogan in Hamburg; editing by Jane Baird

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