Russia, India Consider Grain Exports .

Expectations of surplus grain in Russia and India are driving speculation that the two producers might resume exports, as wheat prices soar.

However, deteriorating prospects for U.S. and European wheat crops mean even the return of exports from Russia and India to world markets this year would be unlikely to lower prices, analysts said.

Grain dealers in Russia are starting to move stocks to ports in the hope that the government will allow exports as early as July. The Kremlin banned exports last year after the worst drought in a century slashed Russia's grain harvest by about one-third to about 63 million metric tons, but hopes that farmers may reap as much as 90 million tons this year have prompted calls for an end to the embargo.

Dmitry Rylko, of Russian forecaster Institute for Agricultural Market Studies, said dealers are hoping to free up storage space for the upcoming harvest. But Russian traders said companies are positioning grain in a bid to ship supplies quickly as soon as the ban is lifted.

"I would assume the Russians want money quickly so, if they can sell, they will sell as soon as they can," said analyst James Dunsterville of Switzerland-based Agrimoney.

In Asia, the U.S. Department of Agriculture's attache predicted that a record wheat crop of 84.2 million metric tons may prompt New Delhi to allow as much as two million tons of exports, the first time in five years India would export grain.

Futures markets for wheat have soared to within sight of records this year after a succession of natural disasters, including the drought in Russia, spurred fears of a shortage of supplies. But the speculation about exports from Russia and India look unlikely to calm nervous markets.

"We don't expect that the Black Sea region will be able to come into the market in the way it did after the 2008 price rally to supply the world with a significant amount of cheap exports," said London-based Rabobank analyst Erin FitzPatrick.

Food-security concerns are high on the political agenda in both countries, so a sudden surge in shipments looks unlikely.

Both Russia and India are struggling with near double-digit inflation despite holding excess government grain supplies in some areas. And with polls already under way in India and an election set for next year in Moscow, observers say domestic politics is likely to come ahead of international markets.

Even if the exports from these producers happen, they are unlikely to make up for a fall in output in the U.S. and Europe. The impact of weather on wheat supplies has been fueling prices for the past 10 months, with the latest concerns about dryness stressing crops in the ground and excessive rainfall hindering planting in the world's two largest exporters. Wheat prices have rallied more than 60% on the Chicago Board of Trade since June 30.

Mr. Dunsterville said while the sudden appearance of exports from Russia and neighboring Black Sea producer Ukraine may put some immediate downward pressure on European prices, their impact would be limited.

"Even if you put their combined exports at 15 million [tons] and you look at what world exports are likely to be, that's a fairly small percentage when in their heyday they were up to a third of the market," he said.

Source : online.wsj.com