July 7, 2005

EU dashes Russia's hopes for higher grain exports

Increased competition from EU grain producers is likely to negatively impact Russian grain exporters in the 2005-06 marketing year, an independent Moscow-based agricultural research group SovEcon said Jun 6.

The EU, in following its policy of aggressive exports even before this year's harvest results are out, has been subsidizing grain exports from the start of the season, unlike previous years.

As such, the EU is expected to increase exports of wheat by 3 million tonnes mainly to the Mediterranean markets, which are key for Russian suppliers, SovEcon said. The EU's higher carryover stocks of wheat are currently estimated at a record-high of 157.3 million tonnes, or 3 million tonnes above the previous year's.

In the meantime, Russia is currently looking to export to drought-stricken Spain and Portugal, which may suffer grain shortages, and hopes that the EU will lift the one-million-tonne quota imposed on Russian agricultural imports.

Russian agriculture minister Alexei Gordeyev said that Russia has the potential to export up to 9 million tonnes of grain next year, with 4 million tonnes making their way to European markets.

However, the EC spokesman for agriculture and rural development, Michael Mann, said that there is a huge grain glut in the EU at close to 17 million tonnes of grains in intervention stocks. As such, it is unlikely to import any grain.

The agricultural sector in Russia, just like other sectors in its economy, is suffering from various trade barriers imposed by export countries. Russia hopes that WTO membership will advance its negotiations for fairer opportunities for Russian producers.