January 30, 2009

The Russian government will tighten its control of its grain market this year due to large reserve volumes and planned creation of the state grain company, reports the US Department of Agriculture.

As of January 23, 2009, the Russian Government purchased 6.4 million tonnes (MMT) of grain for the intervention fund.  According to the First deputy Prime Minister Viktor Zubkov, the government target is to purchase up to 20 million tonnes of grain or 19 percent of Russia's 2008 grain crop.

The USDA reports that grain sold into intervention is currently purchased at a higher than market price. But purchases have been limited due to shortage of adequate storage facilities, uneven distribution of these storage facilities, and unclear prospects of selling grain from these reserves in the future.

On January 12, 2009, the Government sent the President the draft Presidential Decree on the creation of the state grain company which according to the First Deputy Prime Minister Viktor Zubkov, aims "to strengthen Russia's grain potential, including developing the national port infrastructure and storage facilities, as well as a system of transporting and selling grain".

Zubkov also noted that the company will become the biggest grain exporter in the international markets and though he underlined the role of this company in the development of domestic grain market, experts are worried that the major interest of this company will be grain exports, including exports of grain from the intervention fund. Experts consider that the company may control more than 50 percent of the Russian grain market.

For more of the USDA report, please click here.