Turkey said on Monday, May 28, it had raised the benchmark wheat price for purchase from farmers in 2001/2002 by 60.8 percent to 164,000 liras from June. The price was a compromise between higher and lower figures proposed within the cabinet, which had ranged from 155,000 to 180,400 lira/kg.
The purchase prices were keenly awaited in the financial markets as they were seen as a measure of the government's commitment to maintaining a tight budget as part of a new economic program in exchange for $15.7 billion of IMF and World Bank loans.
A statement from the prime minister's office said the State Grain Board (TMO) would buy benchmark hard red Anatolian wheat from farmers at 164,000 liras per kg ($148 per ton), up 60.8 percent from last year's 102,000 lira per kg, or $166.93 per ton then. Purchase prices are raised with 15-day increments until the harvest has been completed in September.
The wheat support prices were the object of wrangling in the government as Economy Minister Kemal Dervis wanted to limit the price rises to the targeted year-end inflation as pledged to the IMF in a letter of intent approved in May.
The government targets wholesale price inflation at 57.6 percent at the end of 2001.
Agriculture Minister Husnu Yusuf Gokalp had submitted various options to the cabinet in early May suggesting purchase prices be raised by an average of 75 percent.
Gokalp's first option, calculated through the formula based on Kansas hard red wheat's CIF (cost-insurance-freight) prices plus a 20 percent margin, would have set the benchmark wheat price at 178,200 lira per kg for June.
The other formulae had proposed prices at 176,764 lira per kg or 180,400 lira per kg.
Dervis had urged a price of 155,000 lira/kg in order to restrain spending at a time when Turkey needs to boost its primary surplus in order to service its debts, which have soared as a result of two financial crises in seven months.
Dervis said earlier on Monday that Turkey could not hand out financial support to farmers and other groups indiscriminately or it risked falling into another financial crisis. Turkey expects to produce about 20 million tons of wheat for 2001/2002, five percent down from the 21 million tons produced last year.
TMO will buy some 3.5 million tons of grain from farmers this year, almost unchanged from last year. It is trying to cut down on subsidies so as to reduce losses to the Treasury caused by the differential between support and world prices. ― (Reuters, Ankara)
By Asli Kandemir
© Reuters 2001
© 2001 Mena Report (www.menareport.com)