Government Eyes $2.1Bln Farm Aid

The state may put 72 billion rubles ($2.1 billion) toward domestic dairies and meat producers to curb Russia's dependence on imported food products, First Deputy Prime Minister Viktor Zubkov said Monday.

"We have raised the question of allocating 72 billion rubles this year for the construction of new and the restoration of already working dairies and meat producers, and the prime minister [Vladimir Putin] has supported this initiative," Zubkov said at an extended panel session at the Agriculture Ministry.

"We must come out of this year with a greater volume of domestically produced milk and meat," said Zubkov, who oversees the country's agriculture sector.

Russia is heavily dependent on imports of these two key animal products. In 2008, the country imported 1.6 million tons of meat Ч more than half of the 3 million tons it produced domestically. In the same year, Russia's milk production Ч 32.4 million tons Ч only increased 0.5 percent from 2007. Its imports, however, were up 38.5 percent year on year to total 19 million tons in 2008.

To increase domestic production capacity this year, all "unfinished investment projects" in the animal-breeding sector will be completely restored in 2009 for about 74 billion rubles, Agriculture Minister Yelena Skrynnik said Monday.

Skrynnik also said the ministry plans to support the creation of 50 new small "family" milk farms to support the sector and create jobs in Russia's farming regions.

The family farms, to be equipped with about 100 head of cattle, will be responsible for producing, processing and delivering milk to local individuals and businesses.

For Russia to maintain its position as a high-quality grain exporter, Zubkov said the ministry must solve the country's "chronic grain storage problems."

"We began growing wheat but are still having problems finding warehouses and elevators to store the grain," Zubkov said.

Russia is one of world's top grain producers, harvesting a record 108 million tons of grain in 2008.

For the 2008-2009 agriculture year, which ends in June, Russia could export as much as 19 million tons of grain, up from the 18 million tons forecast on March 10, Skrynnik said.

The ministry predicts that Russia's export potential will increase at the beginning of the 2009 agriculture season in July, when the new state grain trader, the United Grain Company, begins operations.

To maintain stable grain prices and protect domestic farmers, the ministry plans to spend about 20 billion rubles ($587 million) on grain purchases in 2009 to prop up the flagging prices for the commodity. Since August, the government has spent close to 40 billion rubles buying grain.