10/19/2004 14:58 - An informal meeting of the management of Russia'sfive largest oil-crushing corporations has taken place recently inRostov-on-Don, newspaper Kommersant has informed. The meeting participantshave decided to pursue mutually coordinated pricing policies in purchasingsunflower seeds, the sellers of which raised their prices in hope toobtain overprofits.

The owners of crushing plants have accused foreign companies inspeculative price raising and declared suspension of the seed purchases aswell as an intent to apply for assistance to Federal Antimonopoly Service(FAS). They think that without these measures Russian market of vegetableoils my be flooded with cheap import soya and palm oils, which will entaila collapse of the whole industry.

The meeting was attended by representatives of agro-industrial corporationAston (operator of Millerovo Oil Extraction Plant (OEP) and MorozovskCrushing Plant "Volshebnyi Krai"), agro-holding Yug Rusi (Rostov OEP andcrushing plant under construction in Rostov with 4,000-tonne dailycapacity), company "Buket" (Saratov and Armavir Oil & Fat Plants (OFP),CJSC "Yantarnoye") and group of companies RUSAGRO (Krasnodar OFP, Anninskyand Kropotkin OEP's).

According to the Head of Board of Aston corporation Vadim Vikulov, anextremely difficult situation with purchases of sunflower seeds hasrecently taken shape in the south of Russia, which is the mainsunflower-growing area in the country: the large foreign companies,purchasing sunflower seeds (the multinational Bunge Ltd, the AmericanCargill, Swiss Glencore International, French Louis Dreyfus and others),and also some local traders (Alfa Eko-Don, Yugtransservice and others)over the last month have bought out nearly all of the sunflower seeds inthe region and made the selling price jump up to 8,000 roubles per tonne(29 roubles = $1), while in early autumn the real price for sunflowerseeds, predicted by analysts, was 6,500 to 7,000 roubles per tonne.Vikulov said that such prices for the seeds would inevitably boost theprice of sunoil, whose cost of production will reach 21,000 roubles pertonne.

Vikoulov says that in a situation like this the oil crushers cannot afford"being nose-led by the speculators" and must make an agreement of stoppingthe purchases until "balanced" prices for the seeds are set.

However, the Director of Raw Material Department of RUSAGRO GroupViacheslav Kitaychik has noted that this situation has been generated notonly by the actions of speculators, but also by the farmers' wish to takea grip on the seeds and to attain the highest possible price. As a result,the elevators have proved to be packed with the seeds, which are notwanted by anybody at such prices. At the same time, the simultaneousdecrease of prices for import soyoil might entail a situation when, havinglevelled off with the price of sunflower oil, it may gush onto Russianmarket, narrowing the segment of domestically produced sunoil. Accordingto Kitaychik, such a scenario threatens to avalanche the local market ofoils and fats, kicking out of the scene the majority of large and nearlyall the small oil crushers.

To bring a solution to the problem, Vikulov suggested the colleagues thatthey apply to Federal Antimonopoly Service with a claim to take measuresagainst the speculators, who bought out all the raw material. However,RUSAGRO was considering this measure inefficient. The speculators arepurchasing the seeds through a thoroughly arranged network of "dummy"companies, said Mr. Kitaychik of RUSAGRO, and therefore it will beimpossible to get the proofs of antimonopoly abuses. He thus thinks thatmuch more efficient measure will be agreement between the major crushingcompanies not to buy the seeds at the exaggerated prices: it will beunprofitable even for large companies to keep the seeds in elevators for atoo long time, and the farmers will have nothing to do but to reduce theprice in the nearest time.

And this was exactly the decision, ultimately taken by the fiveoil-crushing holdings in Rostov.