World Grain - December 2010 - 44

FEATURE: WORLD BANK: RUSSIAN GRAIN BAN INEFFECTIVE

global markets to fill any temporary
grain shortfalls and protecting the poor
through reducing taxes and tariffs on
key food products. The World Bank also
suggested making full use of the grain
intervention fund to reduce pressures on
the domestic market.
For the medium to long term, the
World Bank suggested targeting cash
transfers to vulnerable groups. It noted
that cash transfers are used by many
countries including Brazil, China, Mexico and South Africa, and are effective
in ensuring income transfers to vulnerable population segments. In comparison, export restrictions do not reduce
farm-gate prices and result in a negative
supply response.
Another suggested strategy is to improve transport and logistics. These
costs are often a key component of food
prices and are generally higher than Organization for Economic Co-operation
and Development (OECD) benchmarks,
the World Bank said. Countries can
work to lower the overall cost of domestic distribution. It said that severe
difficulties in exporting Russia's 2008
bumper crop highlight the importance
of sufficient and efficient transport and
distribution infrastructure.
Russia recently announced that it is
making an investment of $1.64 billion
to build new sea grain terminals and
junction silos, and to create an independent Transport Grain Company to help
competition development in the railway

transshipment market. The projects are
expected to be completed by 2015, according to Sergey Levin, managing director of the United Grain Company, established last year as Russia's new state
grain trader.
The World Bank suggested Russia
encourage a more robust agricultural
insurance framework. Farmers are
concerned about high premium costs
and inadequate claims settlements,
and overall are seriously underinsured, it said. A more robust framework would boost investment in infrastructure such as on-farm storage,
which would make natural disasters
more manageable.
The final suggestions included increasing public investment programs
to support agricultural productivity improvements, national irrigation development and a rehabilitation program, nationwide price market price information
services, and strengthening the capacity
for food policy formation.
GRAIN SHOCK
The drought - the worst in decades
- has had a major impact on the nation's economy, the World Bank said.
Close to 40% of the crops in the impacted regions - Central Russia and in
the west along the Volga River - have
been destroyed. Wheat prices saw the
biggest jump since 1973, which has impacted a range of food prices.
Prices for grains and related prod-

ucts have soared since July, the World
Bank said. Buckwheat prices more than
doubled from June through October, and
potato prices increased by 30%. Similarly, prices of meat, eggs and cereals
increased more than was typical during
summer.
At the onset of the drought, 27 out
of 88 regions in Russia declared an
emergency. Price increases were seen
throughout the country, but regions in
Central and Western Russia were particularly affected, the World Bank said.
Net effect of the price increases on
household consumption was estimated
as a loss in real household income due
to an increase in expenditures as a result
of higher food prices.
"The net direct and indirect effect of
the drought will result in one percentage point increase in poverty rate in the
entire country - more than 1.4 million
people may have temporarily fallen
into poverty," the World Bank said in
the report.
People on a fixed income will be the
most impacted, with that group seeing a
2.6 percentage point increase in poverty.
The World Bank said the impact on poverty was sizeable but temporary.
As the world's third largest grain exporter, the drought also impacted global
food developments, but less than was
expected, the World Bank said.
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