Russia Spearheads Grain Pool to Control Prices

08 June 2009. The Moscow Times

By Nadia Popova

Russia Spearheads Grain Pool to Control PricesRussia, Ukraine and Kazakhstan, the former Soviet Union’s largest grain producers, will establish a grain pool to be more competitive on the world market, the countries’ agriculture ministers said Sunday at the World Grain Forum.

The announcement, which earned praise from Russian agricultural firms, capped a two-day event started this year to piggyback off the recent success of the St. Petersburg International Economic Forum. More than 1,000 people, including officials from 65 countries, were slated to attend.

“We can’t be slow,” said Agriculture Minister Yelena Skrynnik. “The positions our countries have conquered in the past few years have to be supported by serious investment in infrastructure to create the basis for long-term competitiveness of grain from the Black Sea region.”

Kazakhstan, while not on the Black Sea, is the largest grain exporter in Central Asia. Skrynnik said the three countries’ exports accounted for 24 percent of the international grain market, a figure that could increase to 30 percent to 35 percent in the next 10 to 15 years. “The creation of the pool would allow us to decrease the volatility of prices on the world market and their dependency on speculative factors,” she said.

She did not say when the plan would take effect.

“The creation of the pool means more opportunities for us to export our grain,” said Yury Chukhin, head of the Saratov region-based agriculture holding Sinergiya. “We will have enough facilities to export to the world market, and meeting world demand this way will stabilize the grain prices.

“It will also be easier for us and our Ukrainian and Kazakh colleagues to stand up to the European Union if we agree at home and then come to them with a unified position,” Chukhin said. “It will also be easier for us to compete with the European producers.”

Creating the pool will help companies optimize investments on grain-storage infrastructure, both for domestic supplies and exports, Skrynnik said.

Ukrainian Agriculture Policy Minister Yuriy Melnik and Kazakh Deputy Agriculture Minister Arman Yevniyev said they supported Russia’s proposal.

The pool will also raise the competitiveness of the grain grown in the countries and make the international grain market more transparent, Skrynnik said.

In the next 10 to 15 years, Russia plans to produce up to 135 million tons of wheat annually and to export 40 tons to 50 tons of it, Skrynnik said. This year’s harvest may reach 80 million to 90 million ton, of which more than 20 million tons are set for export, she said earlier. Last year’s record-breaking harvest was 108 million tons, making Russia the world’s fourth-largest grain producer.

The pool could win more clout with the three countries, turning former competitors into allies, forum participants said.

“Now, we fight to the bitter end for the right to export to the EU with our Ukrainian and Kazakh colleagues,” Arkady Zlochevskiy, president of the Russian Grain Union, said on the sidelines of the forum. “The restriction is far from grounded. We are not allowed to the European market, while Russia is open for the local producers.”

The EU has a 2.7-million-ton import quota for all countries in Eastern Europe, Zlochevskiy said.

Russia suggested holding the inaugural world grain forum in St. Petersburg at the G8 summit in July 2008. Opening the event Saturday, President Dmitry Medvedev said Russia wanted to strengthen its position on the grain market and spearhead the campaign to fight world hunger.

“We are obliged to declare — loudly and clearly — our position on the most difficult social problems involving hunger and get through to those countries that haven’t yet realized that this is the most urgent problem,” he said.

Skrynnik, who also spoke Saturday after Medvedev, told the forum she saw a danger of economic turmoil triggering a food crisis. “There is such a danger, as people’s incomes drop,” she said. “Then it becomes unprofitable for the farmers to produce food, and the vicious circle appears.” In this case, Russia could come to the world’s rescue, she said. “Russia is not only oil, gas, metals — it also has the resources to solve problems of world food security,” Skrynnik said.

Russia may supply its grain from stockpiles to the United Nations World Food Program, First Deputy Prime Minister Viktor Zubkov told reporters Sunday. Russia has 9.6 million tons of grain stored.

Apart from declaring its international ambitions, Medvedev met Russian agricultural businessmen on Saturday evening to talk about how the government could help them.

“The difficulties with lending leave us no choice but to support [agriculture],” Medvedev said at the meeting, according to the Kremlin’s web site.

Medvedev then asked the businessmen what kind of support they needed, drawing an eager response.

“We talked about trade financing and export subsidies,” said Ivan Obolentsev, chairman of Rosagropromsoyuz, who was present at the meeting.

Demand for beef, which has fallen recently, and state measures to support it were also discussed. “We suggested support in the form of something like U.S. food stamps,” Obolentsev said.

Medvedev told the businessmen to make good use of the time before Russia enters the World Trade Organization, Obolentsev said.

“We said we are not ready for the WTO because we are not prepared to compete with foreign producers that will get a wider access to the Russian markets after we enter,” Obolentsev said.