Russian wheat harvest meets demand, for now

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Russia's 2004 wheat harvest will be more than sufficient to meet
both domestic and export demand, but efforts by the government to
invest in improving the quality of the harvest, to boost exports
further, have met with a lukewarm reception by framers and grain
processors, reports Angela Drujinina.

"This year Russia will have enough grain to meet domestic production requirements,"​ said Russian Agriculture Minister Alexei Gordeev. "This year we have harvested 76 million tons of grain, which is 9 million tons more than in 2003, and we will be able to fully meet the country's demand for bakery products and forage."​ he added.

Indeed, according to the Minister's forecast, the harvest of high quality wheat was more the twice the volume required to meet domestic demand. "We will therefore be able to export about 8 million tons of wheat, although the number may vary from 6 million to 10 million tons,"​ said Gordeev.

According to data from the IKAR agency, between July and September 2004 total Russian grain exports reached 2.8 million tons, some 0.4 million tons less than in the same period in 2003. A poor performance from barley was cited as the principal reason for the decline: barley exports reached 235,000 tons in July-September this year compared to last year's 1.1 million tons. High prices in Russia, and a glut of low-cost, high quality barley in Ukraine, were cited as the reasons for the fall in barley exports.

In a bid to bolster exports of grain and other agricultural products, Russia is planning to invest RUR33 billion ($1.1bn) in the sector as of 2005, according to Gordeev, who said that he expected Russia to be producing some 110-120 million tons of grain by 2009, of which some 20-30 million tons will be exported.

But Russian grain growers and processors are highly sceptical, commenting that RUR33 billion is simply not enough money to achieve the ambitious goal set by the Minister. Increasing exports of Russian grain will only become possible once the quality of the grain has improved, and there is still a considerable amount of work needed to bring the quality levels up to those required by major wheat importing nations. Russia currently exports most of its wheat to the Middle East, southern Europe, and some African countries, and volumes rarely exceed 8-12 million tons.

Yuri Karpov, president of research company Ecotrans, said: " Only after the quality of Russian wheat has improved will the country be able to expand wheat exports to other nations, and stop importing high quality North American wheat for pasta and malt production."

The urgent need to improve Russia's stock breeding programme - the solution to which is widely acknowledged to be a major improvement in forage quality - could also make Gordeev's ambitious export targets difficult to achieve. "In order to bring the numbers of cattle and poultry up to Soviet-era levels, we need some 70 million tons of grain every year for forage production,"​ said one industry analyst, adding that this left little room for lifting exports.

But no matter how limited the state subsidies are likely to be, they are nonetheless the only subsidies Russia's agricultural sector is likely to get in the short term. Private investors are still reluctant to take the risk of investing directly in a market in such an early stage of development, and only the state has the buying power to purchase fertilisers, machinery and seeds at discount prices and to guarantee that crops will be bought.

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