Russia, Ukraine to regain grip on barley trade

Date:03-29-2011

Black Sea grains producers are poised to resume their dominance over the world barley trade, as a rebound in production signalled by the good condition of winter crops enables them to reopen the export spigots.

Barley supplies, which have this season suffered their steepest decline on record, are set for sharp rebound in many countries as high prices lift sowings, and assuming a return to more typical weather in major producing states affected by drought -Russia-or damp- as in Canada -in 2010-11.

The Canadian Wheat Board, the world's marketer of both barley and wheat, forecast global barley output rising 11% in 2011-12, while Commonwealth Bank of Australia pegged the increase at 20%, taking the harvest to 149m tonnes.

"Global barley production is expected to increase sharply," CBA analyst Luke Mathews said.

"The world's farmers are forecast to respond to high prices by increasing planted area. And a return to 'normal' weather in 2011-12 will see yields increase and less area should be abandoned."

'Export demand will shift'

However, the extent of the production rise will renew fierce competition on export markets, in which Russia, which suffered a halving in its barley harvest last year, and Ukraine, which saw output drop 28%, will resume strong positions.

Indeed, the Black Sea producers will see their harvest rebound by 12m tonnes to 30m tonnes, the wheat board said, noting that winter barley in both Russia and Ukraine, the region's major grain forces, "remain in condition".

"Export demand will shift rapidly to Ukraine and Russia," the CWB said.

The comments came shortly before Yelena Skrynnik, the Russian farm minister, said the country would "at the end of September or in October" review its ban on grain exports, including barley, when it will "have an understanding of the new crop".

The CWB added that, with the Black Sea exporters back, Canada's own barley "will have a difficult time being price competitive into Saudi Arabia", the top importer of the grain.

The board reduced its forecast for returns to farmers from its feed barley sales pool for 2011-12 by 10% to Can$231.00 a tonne.

Wheat forecasts

It also cut Can$38 a tonne, or some 10%, from forecast returns from durum pools, withdrawing an estimate made last month of a decline in inventories of the pasta wheat in the major exporting countries.

"Durum production prospects have improved since last month as weather conditions in North African and European Union durum-growing regions continue to support a favourable crop outcome."

For other wheat varieties, the board cut its price forecasts by Can$23-28 a tonne, forecasting that output could top the 665m-tonne figure which "would almost certainly be above world consumption and have a negative impact on wheat prices".

"Early information suggests that wheat will remain relatively abundant" in 2011-12.