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15 Jul, 2010 07:57

Russia’s grain yield losses became a burning issue to the government

The Ministry of Agriculture says the continuing drought will lead to a reduced grain yield from 9.5 million hectares in 17 regions, bringing the national grain production down to 75 million tones.

Farmers are starting the harvest 3 weeks early to minimize further damage to the crops and prevent domestic price rises. Andrey Sizov General Director at Sovecon says that price increases stem from several global factors along with the poor outlook for the domestic harvest.

“We are seeing domestic prices rise. The first reason is the drought and the growing concern of market participants about the harvest. The second reason is a significant shift in the global market. Spot and futures prices over last month gained 10 – 15%. This has pushed Russia's export price up as well, with the price jumping from $165 to $183 per ton – that's an $18 hike in just a few weeks.”

Sergey Lisovsky, Parliament CTTE for Agriculture says that the government is stepping up measures to extend loan subsidies, help with insurance premiums and continue to provide help with transport costs. However, there are still issues which hamper support, with many farmers saying they face bankruptcy even with extra support.

“The President gave the correct instruction to extend credit. Farmers are unable to return money now and it would lead to massive bankruptcies in the sector. The whole picture we will see later, but the measure that is essential now is tackling railway tariffs so that we will be able to transfer grain from Siberian regions where the weather conditions have been better”

There are two possible results out of all issues: either Russia keeps self-reliance in grain this year or it may face a deficit of grain production due to a lack of government support.