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Russia builds a future for wheat
Although first-day trading volumes were only a modest Rb11.3 million ($480,000), the creation of the new market comes at an opportune time as traders and producers are looking to hedge their risks as wheat prices hit record highs.
It also signals Russia’s objective of building up its financial market infrastructure in general and in particular to become the international wheat trading centre for the Commonwealth of Independent States, attracting business from other major wheat producers in the region, such as Ukraine and Kazakhstan. Namex, formed in July 2002, numbers leading grain traders and food producers among its main shareholders, with Russian exchange operator Micex providing trading and settlement systems support.
It had originally planned to launch wheat futures trading in mid-2007 but a series of technical issues and the government’s imposition of higher export tariffs – hiked from 10% to 40% at the end of January to help ensure a healthy domestic supply of wheat – forced a postponement. Russian agriculture minister Alexei Gordeyev, who attended the opening ceremony, said that despite the recent tariff increase, Russia was ultimately looking to become one of the world’s top three grain exporters within five years. "The country’s objective is not only to meet Russia’s internal needs but also to become a key exporter of grain," he said. Under the state agricultural development programme for 2008-12, Russian grain production is expected to reach at least 100 million tonnes, up from 81.8 million tonnes in 2007. Russia exported 16.7 million tonnes of grain in 2007, up 49.5% on the previous year.
Russia’s agriculture industry is one of the most heavily state-regulated in Europe, giving the government wide-ranging powers to influence the inflow or outflow of soft commodities through quotas or tariffs. Despite the threat of government intervention in the agricultural sector, investors are upbeat about the launch of wheat futures trading. "By definition anything that helps improve market efficiency and pricing transparency is a positive development," says Michail Kart at Moscow-based hedge fund group Marcuard Spectrum.
