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Canada seeks details on Russian export supports

(Resource News International) — Reports about possible Russian grain export support measures have attracted the attention of the Canadian Wheat Board and Agriculture and Agri-Food Canada, who say they are waiting for more information about program details.

The U.S. Department of Agriculture’s Foreign Agricultural Service (FAS) reports that Russian First Deputy Prime Minister Viktor Zubkov has agreed to various measures aimed at supporting Russian grain exports for marketing year 2008-09.

These measures would include a reduction in rail and port terminal fees, expedited reimbursements of value-added tax (VAT) for grain exporters, efforts to stimulate grain and flour exports and possibly grain export subsidies, according to the report.

The FAS said experts believe steps taken to reduce logistics fees and expedite VAT reimbursements are more likely to be adopted than export subsidies but that that could change if domestic grain prices continue to decline.

The proposed measures for the grain industry must be approved by the relevant cabinet members and a resolution must be issued before the measures can come into effect.

The report says limited export opportunities on account of large global supplies and a bumper crop in Russian are depressing domestic grain prices, which prompted Russia’s grain lobbyists to approach Zubkov with their proposals for government assistance.

“Experts estimate that in order to stablize domestic grain markets and prices, Russia will need to ‘push out of the market’ another 10 million tonnes of grain,” said the report.

No direct threat seen

Bruce Burnett, director of weather and market analysis for the CWB, said from an overall grain market perspective, the news that Russia is considering export subsidies is negative, as subsidies distort and depress grain prices.

However, for Canada specifically, Burnett said he does not anticipate Russian support measures posing a direct threat to Canada’s wheat export program.

“The wheat Russia is exporting is not directly competitive with our wheat because of quality differences. Generally, the wheat they are exporting right now is lower-protein winter wheat, headed mostly into Middle Eastern markets, where Canada is not usually as competitive given average ocean freight rates,” he said.

The CWB is monitoring the situation and is waiting for further details about the measures under consideration because those will determine the extent of the impact on global grain markets, he said.

Some support measures, such as domestic grain buyback programs, have been in place in Russia for years and the CWB is waiting to see exactly how new measures will differ from existing ones.

Patrick Girard, a media relations officer for AAFC in Ottawa, said while the department does not currently have any comment on Russia’s plans it will watch to see what, if any, support measures Russia officially announces.

AAFC also said that as a member of the World Trade Organization (WTO), Canada supports the elimination of export subsidies as well as strengthened disciplines on, and substantial reductions to, trade-distorting domestic support.

Australia wary

Australian trade officials and industry members have also said they are opposed to export subsidy programs which encourage overproduction and the disposal of surplus grain onto the world market.

They were quick to point out that a Russian decision to move forward with grain export subsidies would not be seen favourably by the WTO, of which Russia hopes to become a member.

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