#12
US Federal Farm Subsidies May Impact Russian, World Agricultural Markets
Izvestiya
31 May 2002
[translation for personal use only]
Article by Igor Popov: "Ongoing Wheat War"

The world market in agricultural produce is beginning to live by new rules, set by the United States. U.S. President George Bush signed the law on agricultural investments, within the scope of which American farmers will get an additional $190 billion from the government over the next 8 years. Competitors are talking about a "catastrophe for farmers throughout the world," and Russian importers are preparing to purchase an entire series of foodstuffs at reduced prices. This does not make our producers of meat products happy, but their losses may be compensated by purchases of cheaper fodder.

It would seem that, by its new farm law, the USA has put an end to the extended discussion by world agricultural producers about a total rejection of subsidies to agriculture. Now the developed countries will spare no funds for their farmers, trying to retain their presence on the market. The USA is subsidizing primarily plant-growing--the production of grain and oil seed crops. Two-thirds of the funds will go to the 10 percent of the largest farms in the United States (18 percent of the farms in the USA provide almost 90 percent of the agricultural produce). The first payments will begin in October of this year. Thus, as of the Fall, subsidies to agriculture in the USA will increase by 80 percent. This, of course, has evoked a storm of protest on the market. Competitors believe that the Americans are expanding their influence on the market at the expense of others. The subsidies will allow them to sell the products at cost. "This means that the competitiveness of products of other exporters, including exporters of Russian grain, will sharply decline," believes Yelena Tyurina, general director of the Agrarian Marketing Institute.

Today, the USA accounts for 25 percent of the world trade in wheat and 57 percent of soy. But the subsidies will affect not only the grain market. Cheap fodder will have an impact on poultry and pork prices. We know that it is specifically in these products that the USA holds a significant share on the Russian market.

Then again, the head of the Russian representation of the USA Poultry and Egg Export Council, Albert Davleyev, assures us that subsidies to fodder producers will have no effect on prices of American poultry products.

"Prices on meat are determined by other factors," says Aleksandr Stoklitskiy, chief of the procurement department of the "Prodovolstvennaya Programma" ["Food Program"] Company, which imports meat products. "However, I am not ruling out the possibility that cheap fodder may affect the cost of American poultry."

Today, American poultry meat and pork is being edged out of the Russian market by cheaper Brazilian products. Importers say that, perhaps, they will soon have to change suppliers and once again return to the Americans. The situation may also change on the Russian fodder market. Traditionally, Russia has purchased corn and soy in the USA. But now, a large part of the fodder is supplied to the Russian market by Hungary. In the opinion of the director of the Sovekon Center, Andrey Sizov, Hungary will be able to withstand the price onslaught of the American competitors, and has capacities to deal a retaliatory price blow.

"If we do not take measures in time, we may forget about the rebirth of agriculture in Russia," believes Yuriy Kostyuk, head of the agricultural administration of the Rusagro Company. "The first thing we must do is to protect our domestic market against the influx of cheap import."

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