Daily analyst comments

According to Interfax, Prime Minister Vladimir Putin does not look upon a decision to lift export duties on mineral fertilizers as a sufficient replacement for systemic measures aimed at resolving problems in the agricultural sector. "I agree that fertilizer shipments to farmers are a long-standing problem not yet resolved. The monopoly position of some fertilizer producers undoubtedly does harm to the agricultural sector", stated the prime minister. He recalled a recently-adopted decision to lift export duties on mineral fertilizers and direct the proceeds towards developing the agricultural sector. "However, this is not a radical resolution of the problem. We’ve still got problems to think of" – stressed Vladimir Putin.

The government is now in talks with mineral fertilizer producers on their pricing policy on the domestic market. The producers and agencies that make up the mineral fertilizer industry commission were given until mid-October to present the Industry and Trade Ministry with their finalized prices and supply volumes for the domestic market in 2009-2012. If the parties fail to adopt a common approach, it is quite likely that export duties on mineral fertilizers may be raised. At the end of August, Viktor Zubkov announced that the government could lift export duties on various types of mineral fertilizers by 2x to 3x, unless producers agreed with farmers on affordable prices.

In our opinion, a systemic approach should be adopted in order to achieve the sustained development of the agricultural sector, including allocating state subsidies to farmers, as simply raising export duties on mineral fertilizers would not accomplish this task. This approach largely corresponds with the statements made by the prime minister.

We expect mineral fertilizer producers to make concessions to the government by agreeing to temporary cuts in their domestic prices, which would be effective until 2012. In so doing producers would be able to retain their more lucrative export shipments and it is quite likely that the export duties would not be raised in this case.