National Economic Trends Russian Grain Prices Fall for Second Week as Demand Stays Slack

National Economic Trends

Russian Grain Prices Fall for Second Week as Demand Stays Slack

Russian grain prices fell for a second week as demand failed to improve before a ban on cereal exports expired, according to prices tracked by Russia’s Grain Producers’ Union.

Fourth-grade milling wheat, usually shipped abroad, dropped as much as 14 percent to 5,000 rubles ($180) a metric ton in the Southern and North Caucasus federal districts as of July 1, the union said today. Both regions are traditional Russian grain producers.

No ships were able to leave ports when the ban ended July 1 because cargo registration had to be completed before grain loading could start, Arkady Zlochevsky, president of Russia’s Grain Union, said last week. Traders registered 1.1 million tons of grain with customs in the ports of Novorossiysk and Tuapse on the new crop year’s first day, Interfax cited First Deputy Prime Minister Viktor Zubkov as saying last week.

Exporters may ship between 1.5 million and 1.6 million tons of grain out of Russia under commercial contracts this month, according to estimates by the Grain Union and Moscow-based researchers OOO ProZerno and SovEcon. That would be a drop of as much as 21 percent from the year-earlier 1.9 million tons, SovEcon Managing Director Andrei Sizov Jr. told Bloomberg on July 1.

Weak demand from Egypt and other traditional customers for Russian grain was the main reason for the year-on-year drop in exports, Zlochevsky said June 30. The start of local harvesting also put more pressure on domestic grain prices, he said. Egypt, the world’s biggest wheat importer, dropped Russia from its list of approved sources after the export ban was imposed.

Prospective buyers are in no hurry to order Russian grain, awaiting discounts of as much as $30 a ton, Zlochevsky said. They may ask for prices to fall as much as $50 a ton when harvesting has progressed further, he said. That compares with current prices of $250 to $260 a ton ($6.80 to $7.07 a bushel), according to Zlochevsky.

To contact the reporter on this story: Marina Sysoyeva in Moscow at msysoyeva@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Russian Service Sector Growth Slows In June

(RTTNews) - Activity in Russia's service sector increased at a slower pace in June, data from a survey conducted by HSBC and Markit Economics showed Tuesday.

The HSBC/Markit purchasing managers' index (PMI) for the service sector dropped to 55.1 in June from 57.6 in May, which was the highest reading in 13 months. A PMI reading above 50 indicates expansion in the sector, while one below suggests decline.

New orders grew at the slowest pace since November 2010 in June, but was the second-strongest this year. Meanwhile, employment continued to grow in the Russian service sector during the month, though at a slower rate than May's 42-month high.

Input price inflation eased sharply to a six-month low in June, reflecting higher fuel costs. At the same time, prices charged also rose, though at a moderate pace.

At the same time, the composite output index, covering manufacturing and services, dropped to a seven-month low of 53.8 during the month.

by RTT Staff Writer

Russian Consumer Prices Probably Advanced Least in 14 Months on Food Costs

Russia’s consumer prices probably rose in June at the slowest monthly pace since April 2010 as fresh produce eased food costs.

Prices advanced 0.3 percent from a month earlier after increasing 0.5 percent in May, according to the median estimate of 15 economists surveyed by Bloomberg. The annual rate remained at 9.6 percent for a third month, the survey showed. The Federal Statistics Service plans to report the data today or tomorrow.

Seasonal produce from the new harvest is easing price pressure and helping subdue the fastest price growth among the so-called BRIC countries. The inflation rate fell to 9.4 percent on June 27 from a year earlier, the lowest in 2011, the central bank said last week as it refrained from monetary tightening for the first time since November.

“Seasonal factors are helping food prices and that’s the reason why inflation is easing,” said Sanna Kurronen, a Helsinki-based economist at Danske Bank A/S. “Inflation should slow in the summer if the harvest is at least tolerable.”

Cumulative consumer-price growth will probably reach no more than 5.2 percent in the first half and 0.3 percent to 0.4 percent in the third quarter, Alexei Ulyukayev, a Bank Rossii first deputy chairman, said June 17. Year-to-date inflation was 5 percent through June 27.

Central bank Chairman Sergey Ignatiev is targeting inflation of 6 percent to 7 percent this year, the lowest level since the Soviet Union collapsed in 1991.

Above Average Harvest

This year’s grain harvest may reach as much as 90 million tons if favorable weather continues into July, Grain Union President Arkady Zlochevsky said June 30. The harvest was 60.9 million tons last year after the country’s worst drought in 50 years triggered crop losses, sending grain prices soaring.

“Inflation should remain on a downward trend throughout the second half, supported primarily by an easing in food-price inflation,” Gillian Edgeworth, chief emerging Europe economist at UniCredit SpA in London, wrote in an e-mail.

Gasoline prices probably dropped last month as the government increased export taxes on the fuel to drive down domestic prices amid shortages at the pump.