The state will expand the bread place – Newspaper Kommersant No. 50 (7495) of 03/24/2023

The overstocking of the domestic market with grain due to an excess harvest and export problems was actually recognized as a nationwide problem yesterday: the authorities announced a sharp expansion of tools for regulating the grain market. As Kommersant expected, the White House came to the conclusion that new grain purchases for the state fund are inevitable – up to 7 million tons (up to 5% of the crop). In the short term, such a measure will stabilize prices and support agricultural producers, but it may cause difficulties for the government when grain from the state fund has to be sold. So far, a significant part of the excesses of the authorities are still expected to be taken out of the country: in the near future, the “grain decree” described by “Kommersant” will be submitted to the White House in the near future – it actually repeats the “EU gas ultimatum” and, as the authorities expect, will free agricultural exports from sanctions restrictions.

The record grain harvest (157 million tons) provided 177.8% of domestic demand for grain (with a value of 95% in the food security doctrine), Prime Minister Mikhail Mishustin said yesterday in a report to the State Duma. At the same time, the main problem of the agro-industrial complex is connected with updating records – overstocking of the market, which, combined with unclear export prospects, puts pressure on prices. One of the tools to combat the sharp drop in prices and profitability of the agro-industrial complex remains the mechanism of purchasing interventions, during which the state removes “surplus” products from the market by purchasing them for the state fund. The last such purchases were made in 2022: then 3 million tons of grain worth 47.1 billion rubles were purchased for the state fund. In 2023, despite the appeals of market participants, the authorities did not plan to carry out new purchases (this, in particular, was discussed by the head of the Ministry of Agriculture Dmitry Patrushev in an interview with Kommersant – see Kommersant on March 6).

However, Deputy Prime Minister Victoria Abramchenko, who oversees the agro-industrial complex, said yesterday that the government is “considering the possibility” of additionally purchasing up to 7 million tons of grain to the state fund. The problem with the financing of such purchases and storage of the state fund, which was previously pointed out in the ministry, judging by the statements of Ms. Abramchenko, has not yet been resolved: according to her, the Ministry of Agriculture is conducting a “difficult dialogue” with the Ministry of Finance regarding the funds required for this. At the same time, it followed from the words of the Deputy Prime Minister that an excess of grain in the domestic market, as well as an increase in the parameters of financing the state fund, are long-term phenomena. “This year, this is additional funding in the amount of 11 billion rubles, and in 2024–2025 it will be more than 20 billion rubles. in order to ensure purchases for the intervention fund,” the official said.

The scale of the expansion of the maximum volume of grain purchases by the state confirms the authorities’ extreme concern about the prospects for the grain market. The fact is that the “ceiling” of the state grain fund of 10 million tons was already once reached in 2010 (see “Kommersant” dated June 1, 2010), which led to a set of problems that the authorities had to solve for several years . Most of the reserves were purchased (8.1 million tons) made in the crisis year of 2008, when, in order to support the agro-industrial complex, the government did not stop intervention trading, despite obviously exceeding market purchase prices. As a result, by the summer of 2010 it was impossible to get rid of accumulated reserves without loss (market prices by that time were one and a half times lower than purchase prices), and their preservation threatened with losses due to violation of storage conditions and incurred fixed costs for paying for the services of elevators – about 10 billion rubles in year.

Nevertheless, in the White House then, for a year, there were disputes about what kind of mechanism should be used in order to unload state bins: the Ministry of Agriculture insisted on the auction sale of stocks, and First Deputy Prime Minister Viktor Zubkov, who was in charge of the department at the time, insisted on preferential sale of grain “needy” enterprises also discussed the sale of reserves for humanitarian programs and on a commercial basis – with export subsidies, which also provided the budget with additional costs. As a result, surpluses of grain were still sold at spring auctions (when the price of it rises) in subsequent years, and the Ministry of Agriculture avoided the accumulation of excess stocks for more than ten years.

However, the state fund of up to 10 million tons will make it possible to mitigate the fall in domestic grain prices and, as a result, the profitability of the agro-industrial complex in the short term. However, this will not completely solve the problem of overstocking the domestic market – as previously stated, the authorities are making a serious bet on significant export volumes. According to the forecasts of the Ministry of Agriculture, it should be about 55-60 million tons and, as Kommersant noted earlier, deliveries are already behind schedule. The Russian authorities attribute this, in particular, to the failure to fulfill the “Russian part” of the grain deal – we recall that the Russian Federation insists that agricultural exports have not yet been freed from sanctions pressure, neither in terms of payments for it, nor in terms of logistical difficulties.

The Ministry of Agriculture plans to solve the problem with the help of a new scheme for trading grain on the world market. A draft presidential decree published last week on regulation.gov.ru (see Kommersant dated March 20), which, as Victoria Abramchenko said, is now under interdepartmental coordination and will be submitted to the government in the near future, suggests that foreign trade transactions of the Russian Federation with grain will be carried out through one bank – the National Clearing Center (NCC), which will convert foreign currency payments of buyers on the exchange and settle accounts with agricultural producers on their behalf. Explaining the necessity of the “grain decree” and its potential effect, yesterday the vice-premier confirmed its similarity with the “gas decree” of the same content, which protected settlements on Russian gas supplies to the EU from sanctions. In fact, the documents differ only in that the “grain decree” does not involve the conversion of settlements into rubles. As Victoria Abramchenko clarified, the new document allows opening accounts in foreign currency to “protect our friends who are used to receiving Russian food and will continue to do so”: we are talking, in particular, about the EAEU, the CIS and China.

On the issue of abolishing export duties on grain, which also limit the activity of exporters, the White House, despite repeated appeals from the market, remains adamant. As Victoria Abramchenko noted yesterday, the government followed the path of their “adjustment”. “Last year, acts of the government regarding duties were adjusted twice. It was decided to get rid of the price in dollars and set the price in rubles. And then we look at the market,” the Deputy Prime Minister explained, calling the workload “comfortable enough for the industry.” “Kommersant” will follow the development of events.

Kristina Borovikova, Oleg Sapozhkov