September 10, 2010

 

Russia may sell from grain reserves

 

 

Russia has once again trimmed its grain production forecast for this year and plans to sell from stockpiles if domestic prices rise in 2011.

 

The harvest will be 60 million tonnes this year or possibly slightly more, Deputy Agriculture Minister Sergei Korolyov said. His estimate lowered the upper end of the ministry's forecast, which had been 65 million tonnes.

"If after the New Year, prices go up, the government will stamp this out through its intervention fund," Korolyov said, referring to the 9.5 million tonnes of stockpiles accumulated in previous years to support farmers. "The government won't allow prices to rise."

 

The export ban, originally enforced from August 15 to December 31 to ensure domestic supplies, may be extended until November 2011, as the country normally completes its harvest in that month, according to Putin's announcement.

 

Russian farmers are stockpiling grain, expecting higher prices, Sergei Levin, head of United Grain Co., the state-run trader said.

 

Farmers may lose money if they hold on to their grain and the government starts selling from stockpiles, he said.

 

Russia's next grain crop cannot be good when exports are banned and farmers have no incentive to plant, said Vladimir Petrichenko , an analyst at trader WJ Group.

 

Russia may need to import as much as six million tonnes of grain in the current marketing year to meet domestic demand, according to Moscow-based researcher SovEcon. The Agriculture Ministry said September 2 the nation must produce between 85 million and 90 million tonnes of grain next year to ensure sufficient domestic supply.