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Home / Bioethanol / News Russian Federation: Grain and Feed Russian Government Intends to Support Grain Exports 2008Russian Federation: Grain and Feed Russian Government Intends to Support Grain Exports 2008
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In view of Russia's bumper grain crop and rapidly decreasing grain prices in the domestic market, Russia's First Deputy Prime Minister Viktor Zubkov has agreed to measures aimed at supporting Russian grain exports in MY 2008. The measures include reducing grain railway tariffs, expediting VAT 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 Resolution must be issued. Experts consider that measures aimed at decreasing transportation and logistics expenses have higher chances of being adopted than direct budget subsidies to exporters. Russia's Grain Situation in MY 2008 According to Rosstat's data, by the beginning of November, 2008, Russia harvested 112.5 million metric tons (MMT) of grain in bunker weight, or 30.6 percent more than the last year. Experts estimate clean weight grain production at a record 104-106 MMT. Given that the world grain production has increased, Russia's export opportunities are decreasing, and the bumper grain (mostly wheat) crop pushes down domestic grain prices. In European Russia class 3 wheat price decreased by 25 percent to 4,450 rubles per metric ton from middle of September, 2008, to middle of November, 2008, and class 4 wheat price dropped by 30 percent to 3,475 rubles per metric ton . By the middle of November, 2008, Russia exported approximately 9.5 MMT, and contracts for another 4 MMT have already been agreed upon. However, given Russia's logistical challenges and tight competition in the world markets, in winter and spring 2009 additional grain exports will be difficult. Experts estimate that in order to stabilize domestic grain market and prices, Russia will need to "push out of the market" another 10 MMT of grain. Proposed Exports Stimuli
On November 19, 2008, Russia's grain lobby submitted estimates of Russia's grain production, supply and consumption data and requested governmental support for grain exports. The appeal was made to First Deputy Prime Minister Viktor Zubkov, who supervises agricultural issues in the Russian Government. Representatives of the Russian Ministry of Agriculture and Ministry of Economic Development also participated in the meeting. According to mass media, the following measures were discussed and approved: According to mass media, at the meeting they also discussed possible government export subsidies for 10 MMT through July 2009. Two variants of subsidizing grain exports were discussed: direct subsidies to exporters (per metric ton of exported grain), and tied loans to importing countries. The Ministry of Agriculture considered several levels of export subsidies: from 708 rubles ($25.75) per metric ton to 966 rubles ($35.13) per metric ton. Then the total amount of subsidies may cost Russia's federal budget from 7.0 billion rubles ($255 million) to 9.6 billion rubles ($349 million) in 2009 . Representatives of the Ministry of Economic Development (MED) noted that members of WTO have agreed to renounce export subsidies beginning 2013, and that Russia's proposed measures may hinder accession to WTO. From MED's prospective, tied loans to importing countries are better . However, the meeting at Viktor Zubkov did not specify or agree upon the levels, volumes of subsidies, or mechanisms of subsidizing. Comments Experts, who are not related to grain exporting companies, do not think in direct subsidies will be supported by the Government. However, if domestic grain prices continue decreasing rapidly, feed consumption slows down, livestock and poultry industries do not absorb the additional grain, and government procurement fail, Russia's grain export lobby may succeed in launching an export subsidies' mechanism.
Date: 10.12.2008 Leave your comment
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