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Russia May Reduce Grain Purchases in 2016/17

A lack of available credit, high existing inventories, and insufficient storage infrastructure, could cause the Russian government to pull back from grain purchases on the local market in 206/17, according to traders and analysts reports AgWeek.

Every year, the Russian government conducts what are known as intervention purchases of grain on the domestic market to supply state stocks. In 2015/16, Russia raised its stocks by 1.2 million tons, and the agriculture ministry announced that it plans to increase the country’s grain inventories from the current 3.2 million tons to between five and ten million tons.

However, the success of this plan and the volumes of grain being bought in 2016/17 will be determined by available storage and the ensuing balance of supply and demand.

If the country realizes a bumper grain crop exceeding 100 million tons, it would translate to between two and three million tons of grain available to purchase for state inventories. Funding for such purchases has historically been provided by Rosselkhozbank, the state Russian Agricultural Bank for the past decade. However, Rsselkhozbank has been affected by Western sanctions imposed on Russia in response to its activity in Ukraine, resulting in a net loss of US$1.4 billion for the bank in 2015.

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