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National Economic Trends Russian government to prevent possible bread price hikes
http://english.ruvr.ru/2010/08/11/15285777.html
Aug 11, 2010 09:55 Moscow Time
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With grain price hikes being in place in Russia, bread prices are unlikely to skyrocket there in the next several months, Agriculture Minister Yelena Skrynnik told reporters on Wednesday.
She signalled her Ministry’s readiness to hammer out “a range of steps” aimed at containing a possible surge in bread prices in Russia in the months ahead.
Drought may force Russia to import rye for 1st time in 15 years
http://www.rbcnews.com/free/20100811112250.shtml
RBC, 11.08.2010, Moscow 11:22:50.For the first time in 15 years, Russia may be forced to import rye for flour production due to the drought, the Russian union of milling and groats enterprises indicated in an announcement today.
According to the union's statement, gross production of rye is estimated at 2m-2.2m tonnes, including non-food crops that account for about 15-20 percent of the overall amount. At the same time, the country requires nearly 1.8m tonnes of rye for flour production each year.
The millers also expect a deficit of another vital crop - buckwheat - in 2010. The union revealed its forecast for grain harvest this year - 68m tonnes (according to an optimistic forecast). It also revised Russia's grain reserves, indicating that the amount of grain reserves cited by the Russian Federal Statistics Service (Rosstat) was accurate for the beginning of June. However, some 6.3m tonnes of grain were used for domestic consumption in June and another 1.6m tonnes exported. Consequently, as of July 1, 2010, a mere 6m tonnes of grain were held by companies and agricultural enterprises.
Russia needs to introduce a tax on wheat exporters
http://www.ft.com/cms/s/0/a909fd0c-a4e0-11df-8d8c-00144feabdc0.html
Published: August 11 2010 04:12 | Last updated: August 11 2010 06:02
From Prof Padma Desai.
Sir, Your editorial (“Russia’s grain ban is the wrong response”, August 9) correctly suggests that the ban on grain exports announced by Vladimir Putin, the prime minister, is counterproductive. Your suggestions asking countries to invest more in irrigation projects and build bigger strategic grain reserves are also necessary for warding off future grain crises.
Here and now, the Russian government needs to remove the export ban as soon as the forest fires are brought under control and an estimate of the grain harvest is in place. The ban discriminates against Russian wheat exporters to the advantage of foreign suppliers in world markets.
Instead, an appropriate tax on exports of wheat by domestic Russian companies will keep them free to export it at the tax-inclusive price.
The tax will bring revenues in the budget which can be used for providing income subsidies to pensioners and the unemployed with which they can pay for higher bread prices.
The distribution network for the purpose has been in place for giving these groups economic relief during the current financial crisis.
Mr Putin’s suggestion that the ban will help the government build stocks is also misplaced. The government needs to draw down the current stocks for softening the impact of the wheat shortage on bread prices.
Padma Desai,
Gladys and Roland Harriman Professor of Comparative Economic Systems, and Director, Center for Transition Economies,
Department of Economics, Columbia University,
New York, NY, US
Heatwave hits Russian growth forecast
http://edition.cnn.com/2010/BUSINESS/08/11/russia.heatwave.growth.ft/#fbid=2swt6olxu58&wom=false
By Isabel Gorst and Catherine Belton, FT.com
August 11, 2010 -- Updated 0517 GMT (1317 HKT)
(FT) -- Russia has begun counting the economic toll of the worst heatwave since records began as economists warned that the wildfires and disastrous summer harvest could wipe as much as 1 per cent off the country's economic growth.
The record-breaking heatwave has destroyed grain crops across Russia, ruining close to a third of the country's forecast harvest, while wildfires raging in the Moscow region have spread noxious smog over the capital, forcing businesses to close and many to flee the city.
Alexander Morozov, chief economist at HSBC, said the combined impact of the heatwave on agriculture and general economic activity could reduce Russia's gross domestic product growth by about 1 per cent this year, a cost to the economy of about $15bn (€11bn, £9.5bn).
An estimated 10 to 13 per cent decline in Russian agricultural output this year would cost about 0.6 per cent of GDP, Mr Morozov said. Weather-related disruption to industrial production and the retail and services sector could account for a further 0.4 per cent decline.
Economists have predicted that Russia's economy will grow by about 4 per cent this year as the country starts to recover from its steepest recession in more than a decade. But Mr Morozov said the impact of the drought and fires could halt the recovery in the third quarter.
Industrial enterprises, including Avtovaz and GAZ, Russia's biggest carmakers, closed assembly lines this month, claiming high temperatures made working conditions unbearable on factory floors.
Many Russians fled heat and smog in big cities as officials warned that the heatwave carried health hazards. After carbon monoxide carried by the smog in Moscow surged to levels nearly seven times higher than acceptable norms over the weekend, a senior Moscow health official said death rates had almost doubled in the city. On Tuesday, a regional health official said death rates in the region surrounding the capital were up by a quarter.
Officials urged residents to stay at home to reduce exposure to the smog and a quarter of Moscow offices cut working hours, according to a survey by superjob.ru. Many investment banks and embassies were working on skeleton staff on Monday after many were evacuated from the capital.
"The heatwave is good news for ice-cream producers but otherwise it is difficult to find winners," Mr Morozov said.
However, Troika Dialog, the investment bank, warned against exaggerating the impact on Russia's economy. "It is tragic. It is debilitating and unpleasant. But we do not believe it is going to knock economic recovery off course," said Kingsmill Bond, the bank's chief strategist.
Although crucial as a source of employment, agriculture accounts for only 4 per cent of Russia's gross domestic product and just over 2 per cent of its export revenues.
But surging grain prices due to the drought-ravaged harvest are likely to stoke inflation in Russia, economists say, undermining the government's success in driving down inflation to post-Soviet record levels.
Renaissance Capital, the Moscow investment bank, recently raised its inflation forecast from 6.3 per cent to between 7 and 7.5 per cent.
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