Cabinet Set Very High Limit for Grain Purchases

The order of the Prime Minister Artur Rasizade on September 18 set a limit harvesting of grain for the needs of the State Grain Fund (SGF). The reserves of the Fund should not exceed 500 thousand tons of wheat.

Purchase of grain for the SGF has been arranged since 2009. However, the fund does not disclose data on the volumes procured wheat. Only at the end of 2011 at a ceremony to mark the sixth anniversary of the MOE its head Kamaladdin Heydarov said that, according to the "State program to ensure reliability of the Azerbaijani population of food in 2008-2015", SGF in 2009 purchased 160,000 tons and in 2010 this figure rose sharply to 590 thousand tons, and in 2011 fell to its lowest level - 110 thousand tons.

At the time when the Fund was established, the procurement and storage plan was 200 thousand tons. Grain storage capacity is calculated based on three-month rates on consumer per capita, which is a total of about 1.2 million tons per year. Virtually all grain for SGF is imported, as local farmers are not able to supply food grain of the third grade. In 2009, SGF was supplied only 1 thousand tons of local wheat, and last year, it received a little over 3,000 tons.

Why Cabinet first defined such high volumes is not clear. Establishment within the limit of grain purchases within 500,000 tons could mean that the state is willing to provide finance for such volumes. Thus, most of the wheat imported for the state's strategic needs in the future will go to the market and likely at a higher price, and the difference of the purchase and sale prices will settle on the accounts of private companies that are overseen by senior officials.

SGF buys wheat in Kazakhstan and Russia. For the formation of stocks of the Fund the state budget annually allocates several million AZN to the Ministry of Emergency Situations.

According to the rules of running and using the State Grain Fund, wheat stocks are used in case of shortages or skyrocketing prices for wheat and grain products. - 08D-