July 20, 2012

Russia discusses domestic grain market's state intervention

State intervention in the domestic grain market as the preferred method of cooling prices this year has been discussed during the meeting held Wednesday (July 18) by the Russian government commission on food security, an Agriculture Ministry spokesman said.

"There is no new information on interventions," Dmitry Bobkov said by telephone. "The issue is still under discussion and depends on market conditions."

The commission, chaired by Deputy Prime Minister Arkady Dvorkovich, responsible for industry and commodity producers in the new government of Prime Minister Dmitry Medvedev, did not discuss the possibility of imposing a ban on exports, as it did in 2010 when a catastrophic drought destroyed a third of the crop, participants said.

Dvorkovich told Reuters on Tuesday (July 17) he saw no grounds for a ban. This year's crop is expected to fall by as much as 15% from last year's 94 million tonnes.

Earlier this week, Russia's Agriculture Ministry lowered its forecast for this year's grain harvest to 80-85 million tonnes from 85 million tonnes previously, following downward revisions by private-sector groups.

Russia's state grain trader carries out interventions every year to manage price fluctuations, normally buying to support prices in the early part of the season then selling intervention stocks.

This year, after a steep rise in domestic prices driven by drought in the US and in Russia's south, it is likely to sell grain to consumers from intervention stocks, but the timing of such sales was a matter of debate at the meeting, one of the participants said.

"Some said now, some said later," the participant said. The commission will review the situation again in about two weeks, the participants said.

The harvest is in full swing in several key producing regions and a fuller picture of the supply/demand balance in Russia is likely to become clearer.

"I don't think the situation will change much in two weeks," the source added.