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Russia Announces Grain Interventions as Drought Destroys One-Fifth of Crops

posted on July 23, 2010


MOSCOW (AP) - Russia will begin selling grain to its struggling meat and dairy producers after a severe drought killed at least one-fifth of grain crops across the country, the Agriculture Ministry said Wednesday.

The market interventions, totaling at least 3 million tons of grain, are aimed at containing food prices, Agriculture Minister Yelena Skrynnik said.

Russia — the world's third-largest wheat exporter — has suffered its worst drought in 130 years, according to officials. So far, the drought has destroyed 20 percent of the grain sown in central Russia and the Ural mountains, affecting more than 9.6 million hectares (24 million acres) of land and spurring an early harvest.

Some regions have lost up to 50 percent of their crops. At least 23 of Russia's 83 regions have announced a state of emergency.

As a result, grain traders have been driving up prices despite the fact that Russia and other exporters have large reserves, said Natasha Zagvozdina, head of Russian research at the Moscow-based Renaissance Capital.

The interventions will help "halt the rise of grain prices which have gone up disproportionally high compared to the drought figures we're receiving," Zagvozdina said.

Wheat futures on the Chicago Board of Trade have gained nearly 25 percent since June to reach $5.83 a bushel Wednesday on the reports of droughts in Russia and floods in Canada.

Russia's grain stock, meanwhile, stood at 24 million tons as of July 1, following several years of sizable local and foreign investment in land and modern farming practices after decades of Soviet neglect.

The country recorded its biggest harvest in 20 years in 2008 at 108 million tons of grain.

The government is concerned the rising produce prices may threaten its goal of single-digit inflation.

Economists and agriculture experts have said the higher grain prices could add up to 2 percentage points to the overall inflation rate. Consumer prices have added nearly 5 percent so far this year.


Tags: agriculture crops dairy drought meat news Russia water weather