October 16, 2008

  

Russian agriculture sector in need of US$34 billion to refinance credits

    

   

Russian agriculture needs over $34 billion (RUB900 billion) from a government rescue package by the end of 2008 to refinance loans and ride out the global financial crisis, the head of the country's grain industry lobby said on Wednesday.

 

Russian Grain Union President Arkady Zlochevsky said the country's biggest harvest in 15 years had contributed to falling prices, increasing the strain on farmers already struggling to repay debts incurred to buy equipment and improve crop yields.

 

Russia has unveiled a series of packages to free up over US$210 billion for the country's banking and industrial sectors and help the economy survive the global liquidity crunch.

 

High grain crop is expected to exceed 100 million tonnes this year, and combined with falling prices, farmers have to unload their production at low prices to repay loans.

 

Russia could harvest up to 107 million tonnes of grain this year, but losses could occur as a result of adverse weather in Siberia, where wheat harvesting continues, and the country's south, where corn is still being gathered.

 

Zlochevsky also said that domestic grain prices have fallen in line with world prices, lowering the competitiveness of Russian grain on foreign markets and restricting exports and with the capacity to export 23-25 million tonnes, they may export only some 21.5 million tonnes.

 

Russia cannot use ports in Ukraine with capacity to ship out 20 million tonnes of grain, he said, as its ex-Soviet neighbour needs the capacity to handle its own big crop. Low grain prices are also making shipments via Baltic Sea states unprofitable.

 

Zlochevsky said farmers would feed some grain to domestic animals, but this would still leave Russia with a 30 million-tonne surplus.

 

The situation could be remedied by government intervention purchases, which could take as much as 7 million tonnes of grain from the market, he said.

 

Zlochevsky said he expected falling domestic grain prices to raise activity at the tenders.