December 11, 2008


Australia flags concern as Moscow mulls help for wheat exports


News that Russia is considering adopting measures to help wheat exports has been met with some concern by the Australian government and wheat industry participants.


The news comes as Australian exporters grapple with marketing the biggest crop since 2005 after two years of drought, in a world market awash with wheat after a year of record global production.


Australian milling wheat prices have tumbled to around A$260 a tonne from almost A$400/tonne in August under the weight of bountiful northern hemisphere harvests, including in Russia.


A spokesman for Trade Minister Simon Crean said the government was aware of reports relating to Russian measures aimed at supporting that country's grain exports, but any direct impact on Australian exports isn't yet clear.


"Australia believes grain export subsidies provide an incentive to overproduce and to dispose of surplus grain production in the world market," the spokesman said.


Russia isn't a member of the World Trade Organization yet but wants to join in the near future, so any move to introduce export subsidies at this stage sends the wrong signal to WTO members, he added.


The spokesman was commenting after Russia's First Deputy Prime Minister Viktor Zubkov approved measures aimed at supporting Russian grain exports, reflecting the impact of Russia's bumper grain crop and rapidly decreasing domestic grain prices, according to a US Department of Agriculture attache report posted Tuesday on the Foreign Agricultural Services Web site.


The measures include reducing railway tariffs for grain, expediting value added tax reimbursements, stimulating grain and flour exports and possibly issuing grain export subsidies.


Before coming into force, these measures must be approved by the relevant cabinet members and a resolution must be issued.


Experts consider measures aimed at decreasing transportation and logistics expenses have higher chances of being adopted than direct budget subsidies to exporters, according to the USDA attache report.


According to Thursday's edition of the The Land weekly newspaper, the Australian industry is already reeling from the impact of cut-price Black Sea origin grain and discount world freight rates, which have meant Black Sea grain is competitive in traditional Australian markets.


David Ginns, the corporate affairs manager at Australian marketer GrainCorp Ltd. said any subsidization of exports by Russia will potentially have a negative impact on Australian wheat sales.


"As a country through the WTO, we should be vigorously opposing any export subsidies because they corrupt the values in markets," he said by telephone.


A spokesman for Australian agribusiness AWB Ltd. Ian Desborough, said if Russia proceeded with an export subsidy program, it would be a negative price influence on the global market in general, with no specific effect on Australian grain that didn't apply to everyone.


Russia isn't the only producer grappling with the issue of dealing with large exportable surpluses: the European Union is striving hard to keep pushing feed and milling wheat to north and west African destinations, while Eastern Europe continues to be the most aggressive supply region as it moves to reduce large stocks before the next crop, he said.


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