November 27 2002, 14:27 Krestianskiye Vedomosti

Russia: purchase interventions influence upon grain market

Intermediate results of ongoing grain purchasing interventions in Russia and analysis of price situation in mid- and late November have shown that purchases of the 3rd class wheat (top quality wheat according to Russian system) clearly produced positive effect on prices in the Urals and West Siberia, where prices grew by 1 to 2 percent. In Central Chernozemye (Balk Soil regions) and North Caucasus grain owners have preferred to sell grain not to state, but to domestic consumers and exporters, because of better prices.

Purchase of the 4th class wheat (high quality wheat in Russian standards) has produced certain effect on prices in Povolzhye (mid- and lower Volga basin), and to some extent - in Central Chernozemye and North Caucasus, where prices grew 3 to 4 percent. Purchases of this wheat category have not so far reached their goal in West Siberia and Urals, as no price growth has been there registered.

In general, it should be noted that milling wheat prices in virtually all grain producing regions are to a larger degree being influenced by high export demand, rather than by interventions.

However, as regards rye, it can be confidently stated that price growth for this grain in Russian regions (in particular, Povolzhye - 14 percent) has been directly connected with intervention purchases, as no exports demand here is in place and domestic demand is quite feeble. To stabilise price situation in this market, the state needs to buy at least 0.7 million tonnes of rye.

It can also be noted that intervention prices for the 3rd class wheat have been visibly higher than current market ones only in West Siberia, which suggests that in other regions activeness of intervention sales of this wheat category will most likely be decreasing.