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12 Dec, 2008 06:36

State steps up support for grain producers and agricultural machinery makers

Russia will increase import duties on farm machinery to 15% for the next 9 months to support domestic producers, and farmers will get subsidized loans only when buying locally produced farm machinery.

The government is stepping in swiftly to help prop up another Russian producer.  This time it is giving a hand to agricultural machinery producers, threatened by a big drop in spending by farmers hit by the credit crisis.  Prime Minister Putin says the government will slap tariffs on foreign farm machinery imports and allocate $1 Billion to subsidize loans to Russian farmers.

“I think we should support the domestic producers with a temporary 9 month measure.  A new import duty of 15% will be introduced on new and used farm machinery.  The budget money provided to support agriculture should only be used to buy home produced equipment.”

Local agricultural machinery producers welcomed the move, saying it would stave off a crisis in the business.  Just 6 months ago, farm machinery maker Rostselmash enjoyed strong demand for its products – selling its harvesters a month before they were actually built. Now the company is cutting production in half. Russian farmers, starved of credit, are simply giving up plans to buy new machinery.
Russia’s agricultural minister, Aleksey Gordeev, said farmers’ purchasing activity is highly dependent on cheap credit.

“In the past few years we’ve seen that around 70% of farm machinery is bought with subsidized loans supported by the State.”

But farmers are struggling to pay off their current debts.  Despite a record harvest low grain prices have put many farms on the verge of bankruptcy.  The government has promised to rescue them, promising massive intervention on the grain market.  But so far its managed to buy up just 8 million tones of grain, leaving another 20 million tonnes on the market.

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