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IKAR in Mass Media

Tight finance, lack of storage may dent Russian state appetite for grain

06 мая 2016 года

MOSCOW, May 6 (Reuters) - Tight finance, a lack of storage and existing large stocks may dampen the Russian government's appetite to buy grain on the local market in 2016/17, analysts and traders said.

Russia, a major wheat exporter to North Africa and the Middle East, buys grain on the domestic market for state stocks every year in a scheme known as intervention purchases, pitting the government against exporters in years of high demand.

"There is no certainty that it will have money and storage capacity for sizeable purchases," said Dmitry Rylko, the head of the IKAR consultancy. "There may be simple budget constraints: it costs a lot of money to buy and store grain for intervention."

Russia's agriculture ministry has said it would like to raise its grain stocks to 5-10 million tonnes from the current 3.2 million tonnes. It raised them by 1.2 million tonnes in 2015/16.

The volume of purchases in the 2016/17 marketing year will depend on the supply and demand balance, the ministry told Reuters, adding that there was a lack of storage capacity in several regions, particularly in Siberia.

SovEcon consultancy expects the start of the state purchases from Russia's eastern regions in the autumn and traders say the government is unlikely to vie with market buyers in key exporting southern regions.

"We believe that there will not be any significant (state) purchases in the southern regions and that the state buying will not significantly affect exports," one trader said.

"I do not think that the government will be buying large volumes in 2016. I estimate their purchases at 1 million tonnes," another said.

If Russia harvests a large crop of more than 100 million tonnes of grain in 2016, about 2-3 million tonnes would be available for the state stocks on the market, said Arkady Zlochevsky, the head of Russia's Grain Union. "But it does not necessarily mean that there will be the need to do it."

The ministry said the funding of costs related to intervention was included in the country's 2016 budget. It did not provide any further details.

Financing for intervention has come from the state Russian Agricultural Bank (Rosselkhozbank) for the last 10 years. But the bank is now subject to Western sanctions over Russia's role in the Ukraine crisis and reported a net loss of 94.2 billion roubles ($1.4 billion) in 2015.

Rosselkhozbank is continuing to lend to the state for the payment of the last year's crop purchases and will continue to finance it in line with the state programme for agriculture sector development, it told Reuters.

The ministry will offer 10,900 roubles ($165) a tonne for third-class wheat during the 2016/17 year, it said in March.

These prices may turn out to be attractive for sellers in the southern regions of Stavropol and Volgograd, Rylko said. The current price for a tonne of wheat of the same class is 10,750 roubles in the European part of Russia. ($1 = 65.7000 roubles)

Source: Reuters  |  #grain   |  Comments: 0   Views: 90

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