Centre Franco-Russe d’Intelligence Economique et Stratégique

05 décembre 2006

The Rice Factor

Rosselkhoznadzor Announces Ban on Imports of Cereals
Yesterday the Russian agriculture inspection agency, Rosselkhoznadzor, announced a complete ban on the import of rice to Russia, citing quality concerns about imported cereals. Given that almost half of the rice consumed in Russia is imported, experts are predicting that “very soon” the price of rice will rise by 100%.
By Rosselkhoznadzor’s decree, yesterday quarantine certificates for transport into the Russian Federation ceased to be given for rice cereals, and all previously issued certificates were revoked. This amounts to a complete ban on the import of rice into Russia, since no imported products can be sold inside the country without these certificates. The document announcing the ban said, “[the ban] concerns all quarantine certificates for the import of rice cereals, regardless of the product’s country of origin,” and it laid out in detail complaints from the agriculture inspection agency addressed to all of the countries that supply rice to Russia. The document claims that approximately 2,000 tons of dangerously inferior-quality cereals have been delivered to Russia since the beginning of 2006, including rice that smelled of mold from Pakistan, India, Thailand, and Egypt; rice with an abnormally high content of spoiled and yellowed grains from China; rice infected with croup from India and Vietnam; and rice with elevated levels of pesticides from Spain, Uruguay, and Thailand, including some from Vietnam containing the dangerous pesticide chlorpyrifos.

Rosselkhoznadzor calls the decree “temporary,” meaning that it will be enforced “until a special order” comes from the head of the inspection agency. Yesterday Kommersant did not succeed in obtaining clarification of how long it will be until the issuing of quarantine certificates is resumed.

The demand for rice in Russia in 2006 is estimated at 700,000 tons and is worth $550-600 million. Of that, 450-450 thousand tons is imported. Russia’s main suppliers of long-grained rice are Vietnam (30%), Thailand, India, and Pakistan. Short- or round-grained rice, the variety that grows in Russia, mainly comes from China and Egypt and makes up 5-7% of total rice imports. Around 90% of the rice produced in Russia comes from Krasnodarsk Krai, and the rest comes from Astrakhan Oblast and Primorsky Krai.

Importers have identified two possible reasons for the ban. According to the first reason, the ban is the result of lobbying by Russian rice producers. “Currently our rice producers’ harvest usually lies in storage almost until May; now they will be able to sell it earlier and for a good price,” said Igor Strelnikov, the general director of Angstrem. Most believe the main lobbyist in the market to be the group “Razgulyai.”

This year, the group consolidated more than 80% of all of the rice-processing facilities in Krasnodarsk Krai, and the group’s share of Russian rice production is 40%. The company greeted news of the import ban with satisfaction: “The decision that was made reflects willingness to combat the delivery of low-quality imported products to Russia,” said “Razgulyai Cereals” general director Timur Butov. “The main thing is that the restrictions will benefit Russian consumers and producers.” Yesterday RTS share prices for Razgulyai Group, which had been falling for the last two weeks, rose 3%, to $4.

In the opinion of experts, the second possibility for the ban is tied to Russia’s accession to the WTO. They note that Rosselkhoznadzor is counting on its obligatory accreditation procedures to help it retain control over food imports. “As a result of our accession to the WTO, we are losing almost all of our levers of influence on imports,” said RVR Communications head Igor Makurin. “Rosselkhoznadzor and the accreditation of imports are almost the last methods of regulation remaining.” Aleksey Likhachev, the deputy chairman of the State Duma committee on economic policy and a member of the Russian trade delegation to the WTO talks, admits that “the rules of the WTO do not allow import licensing; however, accreditation of suppliers is permitted, although the line between the two procedures is fairly thin.” One of the largest importers notes that “the ban makes perfect sense in the context of Rosselkhoznadzor’s most recent actions,” referring to the situation faced by importers of seafood and by suppliers of flowers from The Netherlands.

Importers are certain that the ban will have a negative affect on the Russian cereals market. “The maximum volume of imports is made up of long-grained rice, which does not grow in Russia,” said Agroalliance general director Viktor Kozyrov. “A decrease in the assortment of rice available will cause prices to rise on all cereals as consumers seek out replacements for rice,” predicts Igor Strelnikov, who also predicts that prices will rise by as much as 20-40% in a week. According to suppliers, current stocks will be exhausted by the end of the month, leading to Prodgamma general director Alexander Khamidulin to predict that prices will rise by 100% during the “several months” that the ban is likely to last. Losses from unfulfilled import contracts are estimated at $5 million.

Those in the market fear that the crisis could signal the beginning of intensified internal inspections. The decree from Rosselkhoznadzor says that goods that have already been delivered may also be subject to inspections. “We use several kinds of American rice,” said Gin-no-Taki restaurant chef Aleksey Golovchenko. “Our supplies will last until May if there is no ban on them being used within the country. If that happens, the forecast is not promising – many suppliers have already raised their prices by 50%.”

Svetlana Mentyukova and Maria Shevchenko (St. Petersburg)

Posté par CFRIES à 11:44 - Agroalimentaire - Permalien [#]