October 29 2002, 14:16

Russia: effects of grain interventions questioned

There are quite different opinions in Russia about how much effective the state purchases of grain (grain interventions), which have been scheduled for November 5 this year, would be. Head of Council of Federation's Committee for Farm and Food Policy Ivan Starikov, commenting on the topic, has said that he supports the government's actions as a whole, but he is aware of grain intermediaries: according to data of the Committee, in 2001 around 80 percent of worth of agricultural products stuck in intermediaries' pockets.

However, large agricultural business views its role in quite different light. Head of Public Relations Department of Agro-Industrial Complex Agros Pavel Oliyanchuk has declared: "Organisation of grain deliveries cannot be referred to as mediatory activities. It is a special kind of business. It is delivery of services, which grain producers are not in power to provide on their own."

Not less controversial are opinions of specialists about whether or not grain interventions would be able to adequately affect the prices. Head of Legislative Assembly of one of Russia's large grain producing regions - Altay Krai - Alexander Nazarchuk regarding the interventions said the following: "They'll be of no use whatsoever. Farmers will go bankrupt anyway." To his mind, the state ought to buy 20 or 25 million tonnes of grain - not 2 to 3 million, as it has been planned for the year.

Though, Vice-President of Grain Union Alexander Ivlev was more prudent in his estimates, saying that "even a small movement forward" in the domain of state purchases may deliver a result of "grain prices being stabilised and grain producers feeling more comfortable."

On October 28 Ivan Starikov said to a press-conference that along with interventions the state ought to assume more effective measures of grain market regulation. On the first place, the law about warehouse receipts should be adopted as soon as possible. Thanks to this law farmers would be able to draw credit resources, which would be secured by the next year's crop. Secondly, the network of laboratories, capable of certifying grain in accordance with world standards, should be established in Russia. "Allocating $10 million for equipping laboratories would work more effectively than allocating $200 million for interventions," Starikov said.

One tenth of financial reserve, set aside in the state budget, could be spent on grain purchases, Starikov thinks. "State assets can be stored not only in the form of money, but in the form of grain as well," he said.

But on the whole, regulation of agricultural products prices must be performed basically not through the mechanism of state interventions, but through decisions of self-regulating associations of producers, who would establish the prices in the market, Mr. Starikov thinks.