MercoPress. South Atlantic News Agency

Russia plans trading company to control cereal exports

Russia is to form a state grain trading company that will control the majority of the country's cereal exports, it has been reported.

The move by the world's fifth-biggest exporter of cereals raises the specter of the old Soviet era and increases fears that the country will use it vast natural resources as diplomatic weapon. Western diplomats and agriculture industry officials said Russia plans to transform its Agency for the Regulation of Food Markets into a state trader, the Financial Times reported. It will control up to 50% of cereal exports. Rising costs for fuel, feed and fertilizer shunted grain prices to all-time highs in June, pushing up the price of crops and livestock by 16% this year. High prices have disrupted international markets as exporters including Russia have placed higher duties on foreign sales or export bans. In part exporters have done this to keep down prices in their own countries. Rising food costs has ignited fears among food-importing countries about their dependence on foreign producers. Russia's position as a major supplier of natural gas is already a concern for Western European governments. The nation has begun to create national champions in energy, aircraft, weapons and metals. The new state company would take over government interests in 28 storage depots and export terminals, including the important Black Sea port of Novorossiysk, the FT reported. The newspaper reported that an US agriculture department internal report said that if the new entity had a dominant hold of the export market, it would jeopardize "a vibrant private grain trading sector". Earlier this year, Moscow investment bank Troika Dialog, said that across a great arc of the Eurasian steppe from Ukraine through Russia to Kazakhstan lies enough arable land to feed the world for years to come, with spare for bio-fuels to help plug the energy gap. In the days of Nikita Khrushchev - a great enthusiast for the vast Sovkhoz collectives - the Soviet Union farmed 240 million hectares. The same territory now farms 207 million hectares. These reserves of idle soil alone are enough to meet the entire global need of 30 million extra hectares over the next decade, as estimated by the UN Food and Agriculture Organization (FAO).