“Records” push the market down

Due to the record grain harvest (more than 150 million tons, of which 100 million tons is wheat), harvested this year in the Russian Federation, prices in the domestic market have plummeted, and now farmers are pinning all their hopes on export deliveries.

In connection with the current situation, the President of the Russian Grain Union, Arkady Zlochevsky, again recalled the well-known saying that in Russia, in addition to bad roads, there are two troubles – crop failure and harvest, and the second for farmers is often worse than the first.

“In general, the harvest is record-breaking, this is understandable and obvious, and there is no escape from these records, and they, of course, “push” the market down, and the economy of agricultural production does not look very attractive, to put it mildly. (…) It is exports until the end of the season (that is, until July 1, 2023 – S.I.) that will keep the market from falling further, because the prices for grain resources in many regions of the Russian Federation are at a critically low level and go below cost . Above, the market is simply not ready to pay, and this is a “litmus test” of the fact that all the records that have been talked about so much are really a fact. Unfortunately, the pressure is unprecedented and supply critically exceeds demand.”

And only export, according to Arkady Zlochevsky, is now able to sanitize the current situation, since the Ministry of Agriculture has already exhausted its capabilities:

“The Ministry of Agriculture has already completed the task of purchasing 3 million tons for the intervention fund, but this has not had any serious impact on the market. It is good, of course, that at least these 3 million tons have been purchased, but as life has shown, the market needs to be supported by more powerful and efficient tools. And the most effective tool for maintaining the market is export. The flywheel of export deliveries unwound, and this stopped the fall in prices: the indicator for the last week on the increase in prices for wheat of the 4th grade is 200 rubles per ton. This is in regions such as the Volga region or the Urals. That is, in the regions where the most critical situation has developed. Now even purchase prices in Siberia are at a higher level than in the Volga region and the Urals. Usually the opposite happens. True, we must pay tribute: in Siberia, the current harvest is of excellent quality, and there is something to pay for.”

If we talk about saving the situation, then, as the president of the Russian Grain Union specified, 31 million 170 thousand tons were exported from July 1 to December 19:

“This is already a good indicator in terms of shipment rates, since the first three months of the season were a failure, and we were very far behind last year’s shipment rates, and now we have caught up and overtaken. According to the general indicator, as of December 19, we overtook the shipments of the last season by more than 1 million tons. True, now they have seriously decreased due to weather conditions: 4 million 700 thousand tons were announced by December, but only 3 million tons were shipped by December 19, and we probably will not have time to make 1 million 700 thousand tons reload, as the weather will not allow, and these shipments will move to January. But I hope that we will not stop during the holidays, but will actively load, and this will somehow compensate for the decline. According to general calculations, it turns out that we are able to export over 60 million tons per season, of which more than 50 million tons are wheat. We can afford this without any damage to the domestic market. Achieving such indicators will become possible if we ship 4 million 900 thousand tons monthly until the end of the season. There are infrastructure opportunities for this.”

Of course, even this barrel is not complete without its own fly in the ointment… So, according to Arkady Zlochevsky, since the beginning of the season, grain prices on the world market have also “decently” decreased:

“Last season, prices at their peak reached $450 and more per ton on the world market, now we are trading, respectively, at 300 kopecks.”

Further, Arkady Zlochevsky spoke about the ranking of importing countries where we sell our grain:

“According to the data as of December 19, it can be stated that Egypt has regained its leading position this season and is in first place in terms of purchases. Turkey has moved to second place. Iran settled in third place. Despite the fact that initially Iran started this season rather weakly, but now purchases have become more active, and during November-December it climbed to the third position.”

In addition to these leading countries, according to Arkady Zlochevsky, they are constantly looking for new sales markets: for example, at the beginning of this season, deliveries were quite active to Algeria, which was traditionally considered a French fiefdom, Jordan, Pakistan, Libya, Saudi Arabia.

So there would be record harvests, and there would be sales markets …

Sergei Ishkov.