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Russia tightens grip over grain exports with state-led association

Major grain traders in Russia have agreed to create a new exporters’ association led by a state-controlled firm, increasing the government’s influence over supplies from the world’s biggest wheat exporter.

Russia’s agriculture ministry has been meeting regularly with big exporters since September to monitor exports amid a lower 2018 crop. In February, it asked the industry to set up a new grain exporters’ union, saying that would help it to better understand the needs of the market.

Eduard Zernin, deputy chief executive of Russia’s state grain trader the United Grain Company (UGC), will head up the new association, the founders said in a statement on Tuesday, a copy of which has been reviewed by Reuters.

Membership of the new association, called the Russian Union Of Grain Exporters, is important for traders who want to keep attending the agriculture ministry’s meetings with exporters, where it updates them on its view of Russian grain supplies.

The ministry previously said it would start discussing with traders in April Russia’s export plans for the 2019/20 marketing season, which starts on July 1.

Russia’s grain supplies abroad could play a key role in President Vladimir Putin plan, announced a year ago, to increase the country’s exports of agricultural products to $45 billion by 2024.

That is a big challenge for the agriculture ministry, which is overseeing the initiative, as agricultural exports totalled $26 billion last year, including $10 billion of grain.

However, some traders have expressed concern the new association may lack independence, and could worsen the ministry’s understanding of the real situation in the market.

“The Russian government sets up a new grains association and then a state-controlled company heads it up. The question really has to be raised about government control,” said a German trader. “This all looks very strange, if a country is seeking more state control over a sector this is what it would do.”

The association’s founders include Russia’s two largest grain traders – Russian firm RIF and the local grain office of global trade giant Glencore, as well as Aston and a subsidiary of UGC.

“Its creation will help to improve the coordination of grain exporters among themselves and with government authorities,” the founders said in their statement.

The agriculture ministry welcomed the new association.

“The ministry hopes that the union will soon be able to unite all the major market participants who will take the most active part in working with the ministry … to improve the regulatory framework, strengthen control over the quality and safety of grain, and increase the export potential of the industry and other areas,” it said.
Source: Reuters (Reporting by Polina Devitt; additional reporting by Michael Hogan; Editing by Louise Heavens and Mark Potter)

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