Updated July 1, 2008

   One expects rich grain crops in Russia this year. Beginning from July, 1 all export duties that have been acting since November 12, 2007 on wheat, meslin and barley are abolished, as reported the National Mercantile Exchange (NAMEX) referring to the corresponding letter of department for agro-food market regulation of the Ministry of Agriculture.

   Duties actually had prohibitive character: duties on wheat were imposed in 40% size from customs ones, but no less than €105 per ton and on barley – 30%, but no less than 70% per ton. Restrictive duties were imposed to stabilize the situation at the Russian internal market, when prices surged up. "The duty played the role it has been assigned to – grain export within its acting period has almost stopped", declared the director of International Grain Company marketing department Nickolay Demyanov.

   According to him, duty abolishment in the run-up to rich harvest is quite logic. "We have earlier forecasted the gross grain harvest at around 90 million tons this year, but it is not eliminated we will review the forecast towards an increase", he marked.

   Ministry of Agriculture names more discreet calculations of future harvest – 85 million tons, from which around 50 million is wheat, and that is by 3 million more than last year (as of July, 1 grain supplies in elevators total around 11,5 million tons).

   Experts link crops increase to the last year’s high prices for grain (in February price for one bushel (27,22 kg) of wheat grew to $12) that has made investors to invest means in production and exploration of new territories for agriculture purposes. "High prices for grain have stimulated the agriculture producers properly, who have sown more fields, as the autumn sowing has been 2 million ha more as compared to the last year", reported the Russian Grain Union vice president Alexander Korbut. "Additional financial resources permitted them to buy a wide range of new technique, to use more fertilizers. Moreover, the agriculture launched new technologies, otherwise we would not have more crops than before the pre-reform years". Companies also mark they have been actively purchasing new lands.

   "We purchased 50 000 ha of land in Russia, 33 000 in Ukraine. These are lands in Stavropol (28 000 ha), in the Rostov area (13 500 ha) and in the Krasnodar Territory (around 8 000 ha). But we are constantly in the stage of new talks", said Valars Group head Kirill Podolskiy.

   Thus, the Russian authorities do not have to worry now that the country remains without grain and bread, and not so much grain will be exported as well. First, prices for grain go down worldwide, as rich harvest is expected in other countries also, like the USA, Canada, Ukraine, the European Union countries, and the Russian producers will not receive high revenues from export. "High competition between countries-exporters and export duties abolishment can provoke the overall price drop for grain in the world, as a result of which the planned volume of export potential will be not realized", says marketing department director of 2K Audit-Business consulting Independent Group Elizaveta Tolstaya. Second, in Russia there is still shortage of transportations. "In Russia still remain problems with providing of cars, there are also difficulties with grain transportation through Ukraine, where significant grain volumes have hoarded in terms of acted restriction on export", says Demyanov.

   According to forecast of ProZerno OJSC head Vladimir Petrichenko, Russia’s export potential in the agriculture year totals around 19 million tons. But according to Mr. Korbut forecast, the real export will not exceed 15-16 million tons.

   It turns out that the rest 70 million tons (and even more) will get to the Russian market, and it means it should result in drop, or at least slowdown, of price raise for bread. But this is only from the theoretic viewpoint. From the practical viewpoint, as experts mark, price drop for bread will not take place. "Consumer prices for bread have not changed at all. Beginning from May wholesale price for flour has gone down, but the retail price remained the same. It is a problem of the state and trade relationship", says Mr. Korbut.