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GOVT. LATE WITH GRAIN INTERVENTION - EXPERTS
Interfax News Agency - Business Report, January 28, 2004
'- The Russian government is already late with grain market commodity intervention, market watchers say.
Selling grain from the state intervention fund is necessary to stabilize grain, flour and bread prices, which have increased significantly over the past few months due to a smaller harvest than last year. The intervention fund holds 1.6 million tonnes of grain, including 1.3 million tonnes of food-grade wheat.

This intervention was needed in November, when there was no such sharp grain price increase, general director of the Institute for Agrarian Marketing (IAM) Yelena Tyurina told Interfax. If intervention begins in February, and if the buyers of this grain are only milling enterprises, then market prices could stabilize temporarily, Tyurina said. The amount of grain offered by the government meets the milling industry's monthly needs, she said.

Tyurina pointed out there is no reason to expect sharp price drops because of the intervention, when it comes, since this is a volume of grain that meets but 30% of the country's average monthly needs (4.85 million tonnes).

Prices will continue to rise, she said, but the effect of intervention will be lower starting prices from which the growth proceeds.

The market situation now, with food-grade wheat prices having neared 6,000 rubles a tonne, is due much to speculative expectations and panic is provoked. Traders and major agricultural producers are holding grain back, she said.

The payment balance shows that before the next harvest Russia's grain stocks will be 32.2 million tonnes (34% less than on the first of last year), while demand is 29.1 million tonnes. So, the country's grain resources are enough, only, there will be very small carryover stocks of 3.1 million tonnes, she said.

If the timing of the commodity intervention is drawn out, it will soon be unneeded, as massive grain imports will begin and this grain will cost around 8,000 rubles/tonne, marketing director at Roskhleboprodukt (part of APK Agros) Nikolai Demyanov has said.

The market needs intervention now because a number of regions (including grain producers) are already feeling the pinch, Demyanov said. Wheat prices in the Krasnodar and Stavropol territories have already topped 6,000 rubles per tonne. In these circumstances, postponing intervention is simply incomprehensible, he said.

Demyanov said he thinks that for the grain sold from the intervention fund not to fall on the export market, but to stabilize the domestic [market], wheat and rye exports have to be prohibited during the intervention period. This ban is necessary, he said, because the 25 euros/tonne wheat export duty imposed in mid-January has not achieved its intended goal.

As reported earlier, the Russian Grain Union has sent Prime Minister Kasyanov a letter expressing concern over the delay in commodity intervention on the grain market and making organizational proposals. The grain community is worried that unfounded delay with commodity intervention could lead to it having less of a positive national economic effect.
MGR Archive 30.1.2004
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