Russian traders left scratching heads at grain intervention fund’s role

Russian grain producers and exporters have been left in the dark over the role of the state intervention fund this marketing year, sources have told Census.

The intervention fund –  a state body which runs an annual buying campaign designed to provide price regulation by buying up excess grain from farmers in times of plenty – is yet to make an appearance this market this year.

In a year when Russia has broken all its previous grain production records, the move has left the market speculating as to what has happened to a body which used to hold significant sway over the grains industry.

Its buying campaign, which is typically well under way by this stage of the year, has failed to materialise with the Ministry of Agriculture repeatedly delaying its start date.

Having started in August during previous marketing years, a pencilled-in September start lapsed and was then pushed back to October and then December.

Minister of Agriculture Alexander Tkachev fuelled further speculation when he recently told Russia’s upper chamber he believed a renewed buying campaign would put additional downwards pressure on the market which is already feeling the weight of excess supply, and would strain silos where some 4.5 million mt is said to already be in storage.

Anecdotal evidence has started to show signs of the industry grumbling at the impact of this year’s massive crop and a lack of clarity on what will be done to provide domestic price support.

“A discount for railway logistics was promised, but so far nothing has happened,” one source said.

Deputy Minister of Agriculture Dzhambulat Hatuov said Thursday that some RUB2 billion in subsidies will make its way into the market in 2018 to help grains producers in remote parts of the country get their produce to market.

However, this turn away from intervention fund buying to transport subsidies may raise more questions than it answers, particularly given Russia’s World Trade Organization obligations.

Despite the lack of clarity on the issue, the trade expects exports to continue at pace as Russia aims to get its grains onto the global market.

“I have no doubt Russia will export 47 million mt of grain this year,” one trader said.