September 23, 2010

Russian grain inventories contract rapidly

Russia's grain inventories have reached a historically low level in early September, which may trigger higher domestic prices after the end of the harvesting campaign, unless the government starts intervention sales.

According to Russia's state statistics office Rosstat, the grain stocks at large and medium-sized farms, known as agricultural enterprises, procurement and processing companies, were 38.8 million tonnes.

This is 15.9 % less than a year ago, although at the beginning of August, the stocks were 10.6 % bigger than in the same period last year. In several large regions in the centre of European Russia and along the Volga river the stocks were 30-50 % smaller than in September 2009.

The harvesting campaign in these regions, hit by a severe drought unseen in more than a century, is already over and shrinking stocks may create a tense grain supply situation there by the end of autumn.

SovEcon does not rule out that if this proves to be true, the government may be forced to start intervention sales of grain from its stocks earlier than by the end of the first quarter of 2011 as initially planned to win a temporary stability.

In Russia, the grain market and related industries use stocks built up during the harvesting campaign till next crop. The bulk of the stocks are accumulated in July, August and September.

In August this year, stocks at agricultural enterprises rose by just 1.3 million tonnes, compared to rise of 12.2 million tonnes in August 2009. Such a low August increase has not been registered since late 1990s.