Tuesday, 18 May 2010

Russian grain mountain threatens to topple over!

Those clever guys at Agrimoney are at it again and picking up on an interesting and timely story. They are reporting (here) that Russia’s grain industry might enter into a price war with Europe as it looks to find an outlet for the growing grain mountain it has taking up valuable space out on the steppe.

This might just be speculation driven by the Russian Grain Union as analysts are currently pegging the Russian harvest on the lower side due to high levels of winter kill and a cold, dry spring.

But it does raise the unpalatable scenario of low prices going in to the next MY coupled with an increasingly likelihood of low(er) yields. Once sobered up, any first year agricultural student should be able to tell you that supply and demand dictates that low yields mean high prices, right? Well not necessarily, last year we saw low yields and low prices, a situation we could all do without repeating itself again this year.