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. Last Updated: 07/27/2016

Union Says Surplus Hurts Grain Market

Even as two years of bumper crops have inspired official hopes for a decade of strong grain exports, the Russian Grain Union said Tuesday the market could hardly be worse.

Infrastructure constraints on exports and a long drop in domestic demand since the Soviet era have limited options for selling the massive surpluses, depressing grain prices and leading farmers to sow 20 percent less area for their winter crops, the union said at a news conference.

Ahead of a government session Thursday that will cover development of and intervention in the grain market, the union has demanded short-term measures including government purchases and lower railway tariffs to boost exports.

The union is also asking for sweeping long-term developments, including support for animal husbandry and expansion of ports and the reform of standards and the industry's legal base.

"Short term, today we can do only two things: increase exports and intervene," said Yury Ognyov, head of Roskhleboprodukt, the center of Interros' Agros agricultural holding. "Other things can't be done in one day. We can't increase herds or port capacity."

Russia produced 85 million tons of grain in the 2001 agricultural year (July 2001 to June 2002) and expects to produce 85.5 million tons in 2002.

Domestic demand for all types of grain amounts to about 74 million tons per year, said Andrei Sizov, an analyst at agricultural analysis center SovEcon.

Yevgeny Bannikov, head of export company Exportkhleb's government programs department, estimated that even with exports of 10 million tons, this year's surplus could reach 17.5 million tons, taking into account previous surpluses and imports.

Grain prices have fallen between 23 percent and 38 percent, depending on type, since July 1, according to the Institute of Agrarian Marketing.

Agriculture Minister Alexei Gordeyev said Tuesday the ministry would intervene at the end of October, using a bourse like last year. The grain union has demanded stricter controls, calling last year's intervention a fiasco. A handful of traders controlled the profits, while producers suffered, the union said.

Sizov criticized the planned intervention, calling for a more gradual and sustained program, as well as more transparency. The government has earmarked 6 billion rubles ($190 million), enough to buy about 2.5 million tons of grain, the union said.

Gordeyev last week said Russia could boost its grain exports by 50 percent this year to 8 million tons and double that by 2010. But the union said infrastructure bottlenecks are already constraining exports at about 5 million tons.

Agros plans to plow up to $100 million into port infrastructure to boost exports, Roskhleboprodukt's Ognyov said.

The union suggested restricting milk and meat imports, saying it would not only boost animal husbandry in Russia, but grain production, too.

Exportkhleb's Bannikov cited an Agricultural Ministry report called "Big Harvest, Big Problems," which estimated a 20 percent decrease in meat imports and a 10 percent decrease in dairy could increase domestic feed grain consumption by 8 million tons.