Russia’s ongoing drought and record heat have substantially altered prospects for the harvest, which, in its turn, will result in skyrocketing grain prices. In the last few weeks, their growth reached a record rate, accounting for some 40 percent. Still, “there are no fundamental bases for the price rally on the market”, says Russian Grain Union President Arkady Zlochevsky.
At present, the world grain market is struck with panic, with growth rates exceeding those of 2007-2008. During that season, the global deficit of grain caused the plummeting of its reserves to the lowest-ever level. However, the current situation differs dramatically from what we witnessed two and a half years ago, the expert stressed and continued:
"Russia’s 2007-08 season grain pool never dropped below 130 million tons, while the volume of world trade totaled 143 million tons. This contrast was exactly what provoked exchange market excitement. According to latest estimates by the International Grains Council (IGC), forecast reserves will reach the level of 192 million tons and the world trade volume is expected to account for 120 million tons - an unprecedented 60-million-ton difference."
Severe drought has ramped up plans to establish a grain union of Russia, Kazakhstan and Ukraine, as proposed by the Russian government last year. Among other things, the process was hampered by the concealed opposition of Western countries which hastened to remind Ukraine, as a WTO member, of the need to be watchful of any unions within the CIS. The main reason for the West’s rejection of this idea was the possible appearance of a new strong player in the world market, experts say. Especially given that the three parties involved would definitely pursue a concerted policy in external markets.
Earlier this summer, Ukraine virtually accepted Russia’s initiative to set up a grain pool and suggested the creation of a grain exchange in the Black Sea region. Kiev even planned to involve Turkey, Moldova, Bulgaria and Romania in this project.
Download
Please rate: