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. Last Updated: 07/27/2016

Wheat Reserves May Be Sold to Curb Fast Growing Prices

Russia may sell some of its wheat reserves to curb prices that have almost doubled in a year, Agriculture Minister Alexei Gordeyev said Thursday.

Prices in Russia have increased from 3,400 rubles ($133) per ton in July to 5,900 rubles per ton now. A drought in the southwest of the country may have destroyed half the crop there, prompting the government to cut its forecast for the national harvest by 2.4 million tons to 76 million tons.

"We are watching the developments in the market," Gordeyev said. "We have a reserve of 1.5 million tons of wheat and we can intervene at any moment. We are ready for this."

The Flour and Cereal Producers' Union asked the government last week to halt exports and sell some of the state grain reserves. The government is unlikely to decide whether to sell reserves before prices reach 6,500 rubles a ton, last seen in the 2003-2004 season, Gordeyev said.

The government sold grain at a discount to mills in 2004, to make up for a shortfall in the harvest of 2003, which caused a decline in prices and hurt producers, said Dmitry Rylko, the director of the Institute of the Agriculture Market Studies, by phone from Moscow.

"It's an experience we wouldn't like to see repeated," he said. "The threat of government intervention might cool down the market in the coming weeks."

Still, "the prices are defined by the world market, so government's ability to manage them is rather limited," Rylko said.