Rising tariffs for diesel fuel worried farmers: products may rise in price

Analysts predict an increase in prices for vegetables and fruits by 5-7.5%

Russian agrarians are sounding the alarm: due to the increase in wholesale prices for diesel fuel, which agricultural enterprises have recently faced, the cost of food production is at risk of seriously rising. The Ministry of Agriculture is aware of the painful topic and is already trying to resolve the issue of stabilizing the cost of fuel with the Ministry of Energy and the Ministry of Transport. According to experts, the only way out of the situation can be a direct instruction to the oil companies to provide the peasants with price preferences in order to prevent food inflation from accelerating.

Domestic companies in the agricultural sector, indeed, have something to worry about. For the last three weeks, diesel fuel at the St. Petersburg International Commodity and Raw Materials Exchange has continuously risen in price and increased in price by almost 20% – to a record 68 thousand rubles per ton. There are several reasons for the sharp rise in fuel prices, as always. Stock traders have long been signaling an increased demand for petroleum products. It is associated with several factors: the active phase of fuel purchases for remote regions of Russia within the northern delivery; scheduled repairs of domestic refineries, some of which did not complete preventive maintenance on time; with the departure from the exchange of Belarusian processing plants, also stopped for temporary repairs.

Representatives of the agricultural industry are well aware of the seasonal difficulties of diesel producers, but they also complain about problems with the delivery of fuels and lubricants: for example, in the Krasnodar Territory there is now a shortage of available fuel volumes, which forces them to bring oil products from neighboring regions – Voronezh, Lipetsk and Tambov regions.

“Fuel prices always rise in the summer, especially for diesel fuel, which is usually in high demand in August, the peak of the agricultural season,” explains Artem Shakhurin, an expert at IVA Partners. – Against this background, naturally, there are interruptions in supplies to regional fuel bases, including in new Russian regions, where processing and retail sales have not yet been restored. A special rise in price is observed during the harvest period – everyone is trying to stock up on “fuel” until the price rises even higher.

Logistical obstacles, according to experts, are one of the main reasons for the incomplete saturation of regions with finished fuel. “There are no obvious prerequisites for a shortage of fuel and lubricants. If we talk about the saturation of a particular region, then fuel is sent to each region from refineries strictly designated for this, ”explains Andrey Loboda, economist, director of communications at BitRiver. – To purchase a large batch of raw materials (more than a tank – in smaller volumes, farms, as a rule, do not buy fuel), farmers have to make a deal on the commodity exchange directly through a broker. The corresponding contract is concluded with the direct participation of the refinery, as well as with the obligation to deliver petroleum products to a specific railway station or to the fuel depot closest to the client. This method is extremely expensive: the time lag from the moment of purchase to delivery can reach a month or more.”

The expert also urged to take into account the international situation: export quotations of the Russian grade Urals, due to the reduction of discounts previously provided to Asian importers, have grown from $30 to $70 per barrel since the beginning of summer. In this regard, domestic suppliers are willing to pass the increase in the world cost of petroleum products (including diesel fuel) to domestic sales tariffs.

“There are no such jumps in prices on the Russian market, but farmers need fuel on a wholesale scale. We are talking about tens and hundreds of tons for each farm,” says Artem Deev, head of the analytical department at AMarkets. “Obviously, our retail gas stations are not able to meet such demand – if everything is given to farmers, then ordinary car owners will be left without fuel.”

The state has already begun to restore order in the wholesale segment of the supply of agricultural companies with diesel fuel at stable prices. During the harvest period, such a decision is more than justified. The Ministry of Agriculture, responding to signals from the regions, convened a special meeting, which resulted in appeals to the Ministry of Transport and the Ministry of Energy with a request to assist in regulating the selling price of fuel for the regions. According to unofficial information, large producers of raw materials have already agreed to sell fuel and lubricants to agricultural companies “at reasonable prices.”

Meanwhile, the escalating situation with the provision of food producers with diesel fuel without any exchange margin continues to cause concern. Since September 1, the government has adjusted the damper mechanism of payments to oilmen from the budget for maintaining a stable cost of fuel in retail sales. Such a mechanism allows oil companies to sell fuel domestically at relatively cheap prices and not increase supplies to the foreign market, where one can almost always earn several times more by exporting the same diesel. Since autumn, compensation payments to domestic producers of petroleum products will be reduced by 50%, which will allow the government to save about 30 billion rubles of budget funds every month. The consequence of such a step could be a drop in the income of large mining companies in the wholesale sector, which will force the oil companies to continue bullying fuel quotes on domestic trading floors.

“In this case, to combat wholesale prices, the state can use other effective tools: limit the export of petroleum products and oblige refineries to sell increased volumes of fuel on domestic exchanges, which will increase the supply of fuel on the domestic market and, as a result, will become a reason to reduce the cost of diesel fuel,” Shakhurin says.

However, the measures taken by officials are rather regulatory and coercive. It takes time to “run in” these tools in practice, which the farmers clearly do not have enough. “The current increase in fuel prices since the beginning of 2023 may lead to an additional increase in the price of agricultural products, including vegetables and fruits, by about 5-7.5%. If the wholesale prices for diesel on the exchange continue to grow, then the cost of the crop will also rise,” warns Vladimir Chernov, analyst at Freedom Finance Global.