Russia launches $3.3 bln loan package to farmers

By Aleksandras Budrys

MOSCOW, March 5 (Reuters) - Russian banks have begun disbursing a record 120 billion rouble ($3.3 billion) loan package to crisis-hit farmers in a bid to secure another bumper crop this year, a senior government minister said on Thursday.

First Deputy Prime Minister Viktor Zubkov, who oversees the agricultural sector, said state-owned Russian Agricultural Bank would supply 60 billion roubles and top Russian lender Sberbank 55 billion roubles for the spring sowing campaign.

Four other banks -- VTB, state bank VEB, Gazprombank and MDM -- would supply the remainder, he said.

"The financing has already started," Zubkov told a news briefing after a government meeting. "Farmers will receive the whole amount of 120 billion roubles in March, April and May."

Russia gathered 108.1 million tonnes of grain in 2008, its biggest crop since 1990. Zubkov said the government was aiming to ease tough credit conditions for farmers as the country aimed for another large harvest this year.

"Preparations for spring sowing are proceeding in an organised manner and everything is being done to guarantee a good crop," said Zubkov, who preceded Vladimir Putin as prime minister and once managed a collective farm in northwest Russia.

Zubkov declined to give a grain crop forecast for this year. He said he expects the total area sown with grains for the 2009 harvest to be 47.6 million hectares, unchanged from last year.

Agricultural analysts SovEcon are forecasting a 2009 Russian grain crop of between 87 million and 96 million tonnes. Industry lobby, the Russian Grain Union, has said the harvest could again reach 100 million tonnes this year.

Analysts and producers have said Russia would encounter problems managing another big crop due to a shortage of storage space and limited export capacity via railways and ports.

SOLVING EXPORT LIMITS

Zubkov said the government was trying to solve problems related to export capacity.

"We have exported over 14 million tonnes this season and may export another 2.5 million tonnes by July," he said, adding the government might also buy 2.5 million tonnes of grain on top of 7.5 million tonnes already bought via intervention tenders.

"I have asked the Agriculture Ministry to provide storage space needed for the new-crop grain, and for it to be available before the end of June, when harvesting starts in the south."

Zubkov said Russia had storage space available in the north of the country, in the Volga region, in the Urals and Siberia, adding: "We have sufficient money to guarantee the transfer."

Zubkov said the government had persuaded fertiliser suppliers to increase sales at lower prices than last year.

"Prices are currently somehow lower than last year, and volumes bought by farmers have risen notably," he said.

Fuel prices, however, had risen in the last two months. He said Prime Minister Putin had ordered oil companies to lower prices to levels seen at the start of January.

"If this is done, and I believe it will be done, we will not need additional funding of fuel acquisition by farmers."

The government has also set aside 25 billion roubles ($690.2 million) for the acquisition of agricultural machinery from domestic producers for subsequent lease to farmers, Zubkov said.

This will permit farmers to buy more than 6,000 tractors, 2,000 combine harvesters and 6,000 trucks, he said.

The government, in a statement prepared for Thursday's meeting, said farmers last year bought 23,800 tractors, 40 percent more than in 2007, and 9,600 combine harvesters, 60 percent more than a year earlier.

But after the end of the 2008 harvest campaign, about 70 percent of all agricultural machinery needed repairs, it said. (Editing by Robin Paxton and Peter Blackburn)