June 9, 2011

Russia needs to ease prices of local grains

Russia's Economic Development Ministry believes it is essential to implement a mechanism to restrict surges in local grain prices, a critical factor for consumer price inflation development, according to Deputy Minister Andrei Klepach on Wednesday (Jun 8).

"We think that we need mechanisms that would help curtail a sharp jump in domestic grain prices. The gap between local and foreign prices exceeds US$100," said Klepach.

The government will drop a grain export embargo, imposed last August in the wake of a severe drought which cut Russia's grain production by 37% from July 1.

Central Bank Chairman Sergei Ignatyev has said the cancellation was the only serious factor that could spur inflation, which is running at an annual 9.7%. The government targets inflation of below 7% this year.

Ignatyev has suggested temporary floating export duty rates to ease the effect of the ban cancellation. Klepach said his ministry was considering the idea.