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Grain prices at risk of rising again


Grain prices are at risk of soaring even higher as uncertainty grips the market about moves by Russia to curb exports of the commodity.

Global prices have soared to record highs in recent weeks, compounded by a severe drought in America's mid-west, where corn and soybean crops are grown.

But now analysts say there is a risk that Russia, one the world's biggest wheat exporters, could curb grain exports to protect local supplies, as crop conditions have worsened in the Black Sea region.

That will undoubtedly push prices even higher, Rabobank senior commodity analyst Luke Chandler says.

"There is certainly a risk that we do see some sort of policy introduction from the Russian government due to the issues they've had in Southern Russia.

"Whether its an export ban, export tax, export quota, there seems to be risks that we do see some sort of introductory policy to try and ensure domestic supplies."

Mr Chandler said it is expected that crop productions there would drop 20-30 per cent year-on-year.

But the Australian Wheat Board is playing down the Russian factor, terming it as "pre-market speculation".

"This has the potential to push prices higher, however, the majority of the markets has already factored into a reduced Russian crop," AWB spokesman Peter McBride told AAP.

Mr McBride said that Aussie farmers are already reaping the benefits of the increased demand for wheat with the reduction in Russian and US production.

"We are exporting Australian wheat at higher prices, so we're getting better returns for farmers.

"Depending on the quality of grain - they can potentially get around $300 per tonne of wheat," he said.

In only the last month, farmers have seen prices shoot up by $65 per tonne.

Australian weather conditions in the coming months will be critical in meeting global demand in the coming months.

Mr McBride said going forward, global prices will be more dependent on the size and quality of the Australian wheat crop.

"If we have a very small crop in Australia, that could potentially impact global prices further, however at this stage, it looks like we're going to have average size crop of around 24-25 million tonnes.