Russia Returns to the List of Grain Exporters?

Wheat prices have been growing after their reduction in autumn

Prices on wheat have already caught up and even surpassed the level of the last spring. Those farmers, who still have some wheat, are happy - now they will be able to recoup their losses that they suffered on account of low prices. The Russian export of wheat was cheap, and it was one of its basic advantages, so traders are concerned about its further fate.

SovEcon center informed that the average price on third class wheat reached 2,900 rubles per ton on the European part of Russia. A ton of wheat cost 2,100 rubles in autumn; it costs 3,600 rubles in Russia's certain regions now. Wheat prices might reach the level of 4,000 rubles per ton by the end of summer.

As a matter of fact, such fluctuations are common for the Russian grain market: prices drop in autumn, then grow in spring. In the autumn of 2000 - the spring of 2001, fluctuations were rather considerable. This "achievement" is likely to be repeated in the current year because of the absence of an efficient system to regulate the grain market. The countries of the European Union have been practicing this system for a long time already. At present moment, the situation is exacerbated with several factors, with a high level of export, first and foremost. The agricultural company Rusagrocapital informed that there had been 13,4 million tons of grain sold abroad since July of 2002. This allowed to remove excessive grain from the home market, although the rush about Russia's export opportunities resulted in the lack of grain.

Another factor, which leads to higher prices, is the unfavorable harvesting forecast. This year it is planned to harvest 70 million tons of grain. This might not be enough for the home market, so there is a risk for Russia to start importing grain again, to experts and officials' regret. The price growth is good for those, who grow grain, who is also capable of upsetting consumers' plans too (cattle-breeding or poultry farms, for instance). The cheap grain of the last year was very good for cattle and poultry farms. Furthermore, meat import tariffs were introduced on the base of the year 2002, which was a good year in this respect. However, it is not ruled out that home cattle breeders will fail to provide enough of their production for the Russian market, if prices on grain continue growing. Meat will get more expensive because of that.

Exporters will suffer from that, especially those, who deal with the construction of the new port infrastructure. Most likely, they will push the Russian government and the Agricultural Ministry to hold a commodity intervention - to sell the grain, which the state purchased in autumn. Bread will not get expensive even if the situation turns really bad. Bread is a social product, the pricing mechanism of which is absolutely different, especially on an election year.

Russky Fokus