Column by Anatoly Kostyrev on the role of the grain deal in the income of farmers

A grain deal that has been in place for about a year, providing for the export of grain from Ukraine through terminals on the Black Sea and the unhindered supply of Russian food and fertilizer, seems to be becoming a scapegoat in Russian agriculture. At least, such a conclusion suggests itself based on the recent meeting of President Vladimir Putin with members of the government.

As the head of the Ministry of Agriculture Dmitry Patrushev noted, the failure to comply with Russia’s requirements on the grain deal led to an increase in transport costs of exporters, which they partly shifted to farmers, and the profitability of grain production almost halved over the year. If in 2021 farmers received 333 billion rubles from growing grain. profit, then in 2022 – 204 billion rubles, that is, they lost about 130 billion rubles, Mr. Patrushev said. “I would ask you to pay attention to this fact too,” the minister stressed.

The market drew attention to the fact that, when discussing the certainly acute topic of reducing the profitability of farmers, the authorities bypassed the mechanism of floating duties on grain exports, which has been in force since June 2021. This tool was just introduced to stabilize grain prices, and as a result, to maintain the cost for flour millers, bakers and livestock breeders. “The dynamics of quotations in foreign markets is now largely amortized and no longer has such an impact on us,” Dmitry Patrushev told Rossiyskaya Gazeta in October 2021.

Indeed, there was an effect. With the cost of wheat on the FOB basis at the end of 2021 at $316 per ton, the exporter paid a duty of $60, and $256 remained for the purchase of the crop, related expenses and own needs, the head of a large agricultural holding said. At the same time, agricultural producers faced a constant increase in costs, some of which were denominated in foreign currency. According to Rosstat, the average cost in agriculture has increased by 15% per unit of output since 2021.

But my interlocutors in the market found it difficult to discover the impact of the grain deal on profitability. World grain prices without a deal would have been below the level of 2021 due to increased supply, and the discount for wheat from the Russian Federation is associated with geopolitical aggravation. Today, grain prices in the Russian Federation are growing, which someone will probably want to explain by stopping the deal, but the main effect is the devaluation of the ruble.

For the regulator, the grain deal, of course, looks like a convenient external factor. Entire industries with strong lobbyists are interested in maintaining export duties on grain, and hardly anyone is interested in complicating relations with them. And for farmers, the decline in profitability after exiting the deal can be explained by other reasons.