Voluntary Report - public distribution

**Date:** 6/4/2004

**GAIN Report Number:** RS4019

RS4019

**Russian Federation**

**Agricultural Situation**

**Grain and Grain Products Prices Update**

**2004**

**Approved by:**

![](media/image1.wmf)Randall Hager

U.S. Embassy

**Prepared by:**

Yelena Vassilieva and Dorothy Adams

**Report Highlights:**

Grain prices increased rapidly in January and February 2004 further
widening the gap between food and feed quality wheat. Post believes, per
preliminary data that prices continued to grow during March, but at
slower pace due to interventions, export tariffs, and administrative
measures aimed at curbing bread prices.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Moscow \[RS1\]

\[RS\]

Table of Contents

[**Grain Prices 3**](#grain-prices)

[Table 1. Average Regional Offer Prices for Grains
3](#table-1.-average-regional-offer-prices-for-grains)

[Bread and Grain Products Prices 4](#bread-and-grain-products-prices)

[Table 2. Russia's Average Flour, Bread, Cereals and Pasta Prices,
Rubles per 1 kg
5](#table-2.-russias-average-flour-bread-cereals-and-pasta-prices-rubles-per-1-kg)

[Table 3. Consumer Price Changes for Flour, Bread, and Cereals from
January 2004 to February 2004, in Percent, by Region
6](#table-3.-consumer-price-changes-for-flour-bread-and-cereals-from-january-2004-to-february-2004-in-percent-by-region)

[Policy 7](#policy)

[Grain Interventions 7](#grain-interventions)

# Grain Prices

According to Table 1, grain prices in all regions increased in January
and February 2004. The price of milling quality wheat was eighteen
percent higher in February than in December 2003 in the Central Black
Earth Economic Region, twenty-five percent higher in the Volga Valley
Economic District, almost thirty percent higher in the Urals, and more
than thirty-four percent higher in the Western Siberia Economic Region.

The price growth of feed quality wheat was even higher than food quality
wheat. In the Central Black Earth Economic Region, the price in February
2004 was 36 percent higher than in December, in the Volga Valley and the
West Siberian Economic Region the price was 46 percent higher, and in
the Northern Caucasus the price was 39 percent higher. The price
increase of rye varied from 27 percent in the Central Black Earth
Economic Region to over 38 percent in the Volga Valley Economic Region.
Fodder barley prices remained relatively low until February, but then
jumped by 30 percent in the North Caucasus, 39 percent in the Central
Black Earth, 41 percent in the Ural Economic Region, and 79 percent in
the Volga Valley Economic District. However, the price of feed barley is
still lower than the price of feed quality wheat.

Post does not have March data, but according to preliminary information,
the rate of price increase slowed due to decreased demand from the
poultry and livestock industry. Meat producers preferred to slaughter
their stock rather than purchase extremely expensive feeds.

## Table 1. Average Regional Offer Prices for Grains

  --------------- ----------- ------- --------- ------- ---------- ------- ---------- ------- --------- ------- ---------- -------
                  2003                                                                        2004                         

                  September           October 6         November           December 8         January           February   
                  22                                    11                                    16                20         

                  Rubles      USD     Rubles    USD     Rubles     USD     Rubles     USD     Rubles    USD     Rubles     USD

  Milling Quality                                                                                                          
  Wheat                                                                                                                    

  Central         NA          NA      NA        NA      NA         NA      NA         NA      5567      192,8   6533       229,2
  Economic Region                                                                                                          

  Central Black   4500        147.3   4500      147.7   4950       165.9   5350       181.0   5664      196.1   6319       221.7
  Earth Economic                                                                                                           
  Region                                                                                                                   

  Volga Valley    4450        145.6   4450      146.0   4700       157.6   5100       172.6   5625      194.8   6350       222.8
  Economic Region                                                                                                          

  North Caucasus  4400        144.0   4600      151.0   5050       169.3   5450       184.4   5792      200.6   6300       221.1
  Economic Region                                                                                                          

  Ural Economic   4000        130.9   4000      131.3   4350       145.8   4800       162.4   5070      175.6   6225       218.4
  Region                                                                                                                   

  West Siberia    3900        127.6   3950      129.6   4300       144.2   4750       160.7   5317      184.1   6385       224.0
  Economic Region                                                                                                          

  Feed Quality                                                                                                             
  Wheat                                                                                                                    

  Central         NA          NA      NA        NA      NA         NA      NA         NA      4917      170.3   6183       216.9
  Economic Region                                                                                                          

  Central Black   3650        119.4   3650      119.8   3950       132.4   4350       147.2   4622      160.0   5900       207.0
  Earth Economic                                                                                                           
  Region                                                                                                                   

  Volga Valley    3250        106.3   3250      106.7   3650       122.4   4100       138.7   4700      162.7   5988       210.1
  Economic Region                                                                                                          

  North Caucasus  3800        124.3   3800      124.7   \-         \-      4350       147.2   4550      157.5   6067       212.9
  Economic Region                                                                                                          

  Ural Economic   3150        103.1   3150      103.4   3350       112.3   3950       133.7   4433      153.5   5763       202.2
  Region                                                                                                                   

  West Siberia    NA          NA      NA        NA      NA         NA      NA         NA      5200      180.1   6000       210.5
  Economic Region                                                                                                          

  Rye                                                                                                                      

  Central         NA          NA      NA        NA      NA         NA      NA         NA      5133      177.7   5733       201.2
  Economic Region                                                                                                          

  Central Black   2550        83.4    2850      93.5    4000       134.1   4450       150.6   4833      167.3   5667       198.8
  Earth Economic                                                                                                           
  Region                                                                                                                   

  Volga Valley    2550        83.4    2650      87.0    3500       117.3   3900       132.0   4763      164.9   5400       189.5
  Economic Region                                                                                                          

  North Caucasus  NA          NA      NA        NA      NA         NA      NA         NA      NA        NA      NA         NA
  Economic Region                                                                                                          

  Ural Economic   2150        70.4    2600      85.3    3300       110.6   3950       133.7   4267      147.7   5100       178.9
  Region                                                                                                                   

  West Siberia    NA          NA      NA        NA      NA         NA      NA         NA      4700      162.7   5150       180.7
  Economic Region                                                                                                          

  Fodder Barley                                                                                                            

  Central         NA          NA      NA        NA      NA         NA      NA         NA      3550      122.9   4325       151.8
  Economic Region                                                                                                          

  Central Black   2950        96.5    2600      85.3    2800       93.9    3100       104.9   3657      126.6   4311       151.3
  Earth Economic                                                                                                           
  Region                                                                                                                   

  Volga Valley    2950        96.5    2600      85.3    2850       95.5    3100       104.9   3533      122.3   5544       194.5
  Economic Region                                                                                                          

  North Caucasus  3250        106.3   3250      106.7   3400       114.0   3450       116.8   3967      137.4   4500       157.9
  Economic Region                                                                                                          

  Ural Economic   NA          NA      NA        NA      2400       80.5    2950       99.8    3600      124.7   4167       146.2
  Region                                                                                                                   

  West Siberia    NA          NA      NA        NA      NA         NA      NA                 NA                NA         
  Economic Region                                                                                                          

  Ruble/USD                   30.56             30.47              29.83              29.55             28.9               28.5
  exchange rate                                                                                                            
  --------------- ----------- ------- --------- ------- ---------- ------- ---------- ------- --------- ------- ---------- -------

Source: Interfax: Food and Agriculture Reports, "Unidell" reports

# Bread and Grain Products Prices

Due to administrative measures, including the distribution of grain
purchased from the state intervention fund, the average price of rye and
wheat bread increased only slightly in February, by 3.5 and 3 percent
from January's level in spite of a sharp, over six percent increase in
the price of wheat flour. However, the price of groats continued to
decrease. Cereals made from groats constitute a big portion of the
Russian diet, especially for people with low incomes, and this has
helped keep the price of low quality bread from increasing more. At the
same time, prices of pasta products in February increased at a higher
pace than in January and December, 2003.

Post forecasts a further increase in bread prices in March and April,
but at a slow, "controlled" pace. According to the latest official
estimates, stocks of grain available for bread production were 18mmt in
March which is enough for nearly six months of food grain consumption,
or until the new harvest is well underway. Post believes this amount
includes some class four wheat, which can be milled into flour. Regional
prices are shown in the Table 3. Differences in prices from region to
region reflect the level and intensiveness of administrative control
over prices (in the wheat-rye and wheat bread segments).

## Table 2. Russia's Average Flour, Bread, Cereals and Pasta Prices, Rubles per 1 kg

  --------------------------- ------- ----------- ---------- ------- ---------- -------------
                              Wheat   Rye and     Bread and  Rice    Millet     Pasta
                              flour   wheat-rye   bakery             (groats)   (vermishel)
                                      bread       products                      
                                                  made of                       
                                                  wheat                         
                                                  flour                         

  February 2000               7.56    6.65        8.08       14.79   6.50       14.88

  February 2001               8.22    8.07        9.44       12.92   7.11       15.66

  February 2002               8.40    8.79        10.27      14.03   7.21       17.03

  January 2003                7.94    9.22        10.71      15.73   10.00      17.03

  February 2003               7.96    9.32        10.79      15.84   10.64      17.13

  March 2003                  7.99    9.38        10.84      15.88   11.61      17.19

  April 2003                  8.04    9.52        10.99      15.86   12.60      17.27

  May 2003                    8.22    9.77        11.30      15.81   13.61      17.39

  June 2003                   8.84    10.26       11.92      15.81   14.54      17.60

  July 2003                   9.35    10.47       12.21      15.83   15.85      17.89

  August 2003                 9.57    10.59       12.36      15.84   17.18      18.10

  September 2003              9.82    10.93       12.80      15.89   18.14      18.27

  October 2003                10.65   11.58       13.53      15.96   18.14      18.47

  November 2003               11.11   11.86       13.84      16.12   17.42      19.18

  December 2003               11.40   12.07       14.05      16.30   16.76      19.43

  January 2004                11.79   12.76       14.79      16.55   16.23      19.83

  February 2004               12.57   13.21       15.23      16.99   15.61      20.44

                                                                                

  Feb. 03 to Feb. 04,         57.91   41.74       41.15      7.26    46.71      19.32
  percentage change                                                             

  Jan. 04 to Feb. 04,         6.62    3.53        2.97       2.66    -3.82      3.08
  percentage change                                                             

  Dec. 03 to Jan. 04,         3.42    5.72        5.27       1.53    -3.16      2.06
  percentage change                                                             

  Nov. 03 to Dec. 03,         2.61    1.77        1.52       1.12    -3.79      1.30
  percentage change                                                             

  Oct. 03 to Nov, 03          4.32    2.42        2.29       1.00    -3.97      3.84
  percentage change                                                             

  Sep. 03 to Oct. 03,         8.45    5.95        5.70       0.44    0.00       1.09
  percentage change                                                             

  Aug. 03 to Sep. 03,         2.61    3.21        3.56       0.32    5.59       0.94
  percentage change                                                             
  --------------------------- ------- ----------- ---------- ------- ---------- -------------

Source: Torgovaya Gazeta

## Table 3. Consumer Price Changes for Flour, Bread, and Cereals from January 2004 to February 2004, in Percent, by Region

  ----------------------- ------- ----------- ---------- -------- -------- -------------
                          Wheat   Rye and     Bread and  Rice     Millet   Pasta
                          flour   wheat-rye   bakery              cereal   (vermishel)
                                  bread       products                     
                                              made of                      
                                              wheat                        
                                              flour                        

  Russia, Average         6,62    3,53        2,97       2,66     -3,82    3,08

                                                                           

  Belgorod oblast         6,59    -0,53       0,45       4,89     -9,37    1,09

  Bryansk oblast          7,15    6,48        7,70       3,42     -2,85    4,05

  Voronezh oblast         11,46   -1,63       1,23       4,62     -13,82   4,71

  Kostroma oblast         4,30    4,90        6,15       3,98     -15,61   3,90

  Lipetsk oblast          10,10   -2,13       7,63       4,16     -14,03   1,21

  Ryazan oblast           1,69    -3,67       -2,34      3,82     -1,37    6,53

  Tula oblast             4,85    11,24       13,69      2,95     -4,16    3,74

  Moscow, city            1,85    1,92        1,04       0,20     -2,76    1,12

  Komi Republic           6,85    1,56        -0,58      2,81     0,00     2,04

  Arkhangelsk oblast      2,77    1,14        0,00       4,32     -3,34    2,66

  Murmansk oblast         5,62    11,18       7,22       -10,25   -6,57    1,13

  Novgorod oblast         4,98    8,44        11,02      6,15     -2,61    5,53

  St.Peterburg            7,40    0,49        1,67       1,98     -8,34    12,34

  Krasnodarskiy kray      9,28    0,00        0,00       0,70     -3,43    3,86

  Stavropolskiy kray      8,42    0,80        5,03       1,52     -3,40    4,96

  Astrakhan oblast        2,91    9,79        3,96       2,44     -3,62    0,42

  Republic of Tatarstan   2,78    0,11        0,00       3,12     -1,00    2,79

  Chuvashiya Republic     8,83    3,19        0,00       4,58     -3,97    5,17

  Kirov oblast            3,16    9,45        6,83       4,75     -4,72    3,10

  Nizhniy Novgorod oblast 9,41    10,48       8,53       9,02     -3,00    6,58

  Perm oblast             4,96    3,89        4,05       5,73     -4,94    2,54

  Samara oblast           10,51   1,88        2,81       1,35     -9,56    1,09

  Ulyanovsk oblast        6,64    -0,08       0,00       2,69     -2,34    3,99

  Sverdlovsk oblast       9,78    13,39       13,95      3,37     -6,50    4,75

  Tyumen oblast           6,69    3,02        2,38       0,88     1,94     2,13

  Chelyabinsk oblast      13,14   10,20       7,89       2,71     -0,55    2,97

  Krasnoyarskiy kray      13,11   3,29        -6,15      1,36     -3,19    2,38

  Irkutsk oblast          10,27   1,97        2,39       0,94     -0,89    3,81

  Kemerovo oblast         7,97    0,00        0,00       2,84     -2,00    0,06

  Novosibirsk oblast      11,45   3,94        0,68       -0,75    -6,06    21,08

  Omsk oblast             10,79   2,64        2,89       3,17     -0,37    5,26

  Primorskiy kray         5,95    0,42        1,14       2,72     2,23     2,95

  Khabarovskiy kray       3,58    4,58        2,02       5,89     -8,98    2,00
  ----------------------- ------- ----------- ---------- -------- -------- -------------

Source: Torgovaya Gazeta

# Policy

According to the latest information from the Ministry of Economic
Development and Trade, the temporary special export tariff (please see
GAIN report RS3054 for more information on this tariff) for wheat,
meslin and rye will not be extended after May 1, 2004. This decision is
based on recent analyses of the grain situation which revealed that the
monthly consumption of food grain in Russia is three mmt and the present
food grain reserves (\"food grain in the market\") are eighteen mmt,
more than enough to last until the upcoming harvest.

## Grain Interventions

Grain interventions began on March 18 and will run through May 1 2004.
The grain is being sold through exchanges directly to flourmills. As of
April 1, 2004 the following amounts of grain were sold: 277,600 metric
tons of class three wheat, 529,400 metric tons of class four wheat, and
136,400 metric tons of food quality rye or 59% of the total amount. At
the latest session held on March 31, 2004 class three wheat was sold for
an average of 4,440 rubles per metric ton, class four wheat sold at an
average of 3,913 rubles per metric ton, and rye was sold for an average
of 2,840 rubles per metric ton.

The sales are organized by the Central Russian Universal Exchange and
the National Commodities Exchange and use the unified electronic trading
system of MICEX. Currency-financial exchanges in St. Petersburg, Nizhny
Novgorod, Novosibirsk, Samara, Rostov and Yekaterinburg have also been
designated as trading floors.

On the eve of the new crop and in the framework of the development of
new agricultural law, the industry and some officials proposed two
amendments to regulate the grain market. The first is to make
interventions an integral part of state policy so a "special" decision
of the GOR will not be needed to conduct them and to set the annual
reserve at 4-5 mmts. The second proposal is to develop a law on
regulation of bread prices. However, this proposal is not supported by
the grain industry, but rather reflects general anxiety among top
politicians on social stability. However, in the draft act on the
regulation of bread prices presented by the Agrarian Committee of the
Duma, the actual decision and regulatory measures are assigned to
regional authorities. Thus, these authorities, in the case when bread
prices increase four percent year to year, or if this price is 1-2
percent higher than the current rate of inflation, bread price could be
"curbed" either by local interventions from the local reserves, or by
setting the trade margin. Although this idea, in general, received
support from the President of the Russian Federation, this Law is not
likely to be adopted before the next crop.