MOSCOW, Aug 2 (Reuters) - Russia allocated 0.5 million metric tons of grain from the state grain fund for market interventions in the second half of 2024 to maintain price stability and encourage farmers to sell their grain stock, the government announced on Friday.
"The decision will contribute to maintaining stability in the domestic food market," the government said in a statement.
Domestic grain prices in Russia peaked in June and have been steadily falling as the new harvest began. However, many farmers are withholding their stock in hopes of securing better prices later, creating price uncertainty for millers.
This uncertainty has led to a 20%-30% increase in flour prices since April, according to data from the Russian Bakers' Union. If this increase translates into the price of bread, it will further fuel inflation, which is already running at 9%.
"The release of grain from the intervention fund is intended to stabilize raw material prices for millers. It will contribute to at least stabilizing flour prices, and possibly even reducing them," said Igor Sviridenko from the Russian Union of Flour and Cereal Enterprises.
Falling or even negative profitability of wheat production is forcing many farmers to withhold their stock, according to the IKAR consultancy. A market source told Reuters that the government's decision is also an attempt to signal to farmers to begin selling now. (Reporting by Gleb Bryanski, Editing by Louise Heavens)
