The Grain Union explained the sharp drop in grain exports from Russia

Russia, one of the main grain exporters in the world, has reduced deliveries abroad by almost 27% in July-August this year. According to news agencies, our grain exports amounted to only 5.9 million tons of wheat – this is the minimum for the last five years. The official explanation for this fall is the high price of Russian wheat compared to European counterparts. What is behind this? It turns out that not everything is so simple in the grain market.

It is not at all in Russia’s interests to reduce export deliveries of grain (mainly wheat). Our harvest is really expected to be a record one – according to the Ministry of Agriculture, 129-130 million tons. And some analysts even predict up to 145 million tons.

Sanctions on food exports from Russia in general and on grains in particular have not been formally introduced. But this does not mean that all obstacles “from the field to the counter” have been cancelled. Ships with cargo from Russia still cannot enter foreign ports, the SWIFT international payment system does not work, some countries do not want to accept Russian means of payment… As you can see, there are significant barriers for exporters.

To get around them, grain for export flows in different ways. Let’s say our wheat is brought to Kazakhstan, and from there – to the destination. Or to India – and already further without stopping. Intermediaries appear in the supply chain, who, for obvious reasons, also want to earn money, pinch off part of the margin. Exporters are trying to include these additional costs in the cost of goods, which affects its final price.

Buyers of our grain — mostly poor countries that need to pay extra for food. Although at the previous, lower prices, they did not always have the opportunity to do this. The famine, experts emphasize, is not that there are physically no necessary volumes of grain, but that the countries do not have funds for purchases. The removal of all barriers to exports should be dealt with by the UN.

What else prevents our farmers from supplying wheat abroad? We ask this question to Elena Tyurina, Director of Information and Analytical Support of the Russian Grain Union.

— According to our data, since the beginning of the season, wheat exports have decreased, after all, not by 27, but by 12%, — she said. — In the period from July 1 to August 20, our deliveries to the countries of Central and South Africa decreased markedly.

Exactly a year ago, our caravans of ships were carrying cargo to Senegal, Cameroon, Nigeria (more than 500 thousand tons), Congo and Tanzania. There are practically no such deliveries this year. Although ties with traditional partners are still stable. These are Egypt, Turkey, Iran, Algeria, Sudan. Libya has already replenished its stocks of Russian wheat by 70%, Saudi Arabia generally plans to increase purchases three times.

— They say that exports “dipped” due to the high cost of Russian wheat, that it is not competitive in comparison with European. What are the prices on the market now?

— There was a time, from July 1 to July 20, when our goods, say, for wheat of the 4th class, cost 15-20 dollars more per ton. However, with an increase in the gross grain harvest and yield forecasts (which are recognized, among other things, by the US Department of Agriculture), prices for Russian wheat fell by about 20%. Now they are at the level of the average European – 324 dollars per ton. French for comparison costs 323.

— So now we are fully competitive?

— Farmers would like more. We have a high export duty, this year, in terms of currency, 81 dollars per ton. 2.6 times higher than it was in 2021 – $51. Manufacturers do not benefit from such a duty — with falling purchase prices. If the government reduced it to at least $ 50, or even better, canceled it altogether, our wheat would have no equal in terms of competition.

What else greatly affects the cost of goods is the charter of ships and cargo insurance. Our exporters practically do not have their own large-capacity vessels, European shipping companies refuse us, we have to look for transport in third countries. The exporters program has plans to acquire ownership of large vehicles. But this, of course, is a long story. In the meantime, both freight and insurance, which are carried out by European companies, have risen in price very much. Which also affects the final price of the goods.

Russia has a high export potential, we can export large volumes. The issue of competitiveness and logistics.

— Will bread remain on the domestic market? What is the price of wheat in Russia?

— Here you can definitely not worry. Wheat of the 4th class within the country this year costs an average of 12.2 thousand rubles a ton, almost 15% lower than a year ago. A record yield is expected.

Published in the newspaper “Moskovsky Komsomolets” No. 28854 dated August 25, 2022

Newspaper headline:
Restricted grain