World Grain - December 2021 - 27

try has exported around 35 million tonnes per year.
To a certain degree, Russia's push to become the
world's leading wheat exporter may have been precipitated
by a lengthy price decline of oil and natural gas, which
for many years have been Russia's most lucrative export
commodities. Despite the current spike in oil prices, many
countries are vowing to switch to green alternatives, putting
the long-term future of fossil fuels in doubt.
Perhaps that is part of what inspired Russia's push for
more revenue from agricultural exports. In 2012, Russian
President Vladimir Putin boldly stated that Russia would
double its grain exports by 2020.
With that goal met, the question is where will Russia's
grain industry go from here? Will it remain a powerhouse
wheat exporter? Will it become a bigger producer and exporter
of other grains? Will some unforeseen issue such as
climate change or geopolitical tensions negatively impact
its role as wheat supplier to the world market?
Opportunities and challenges ahead
When looking to the future, one must always consider that
while Russia has become a more market-oriented economy,
it still operates under more government control than
its wheat-exporting competitors such as the United States,
Canada and Australia.
Since June 2021, Russia has placed a floating tax on
wheat exports, reportedly to tame food inflation, which
has gripped the country, as well as most of the world, in
recent months. Historically, Russia has been quick to impose
export quotas or even bans during times of drought
or domestic food inflation. In 2010, after drought devastated
the country's wheat crop, it imposed an outright export
ban, a move that caused global wheat futures to spike
and may have indirectly contributed to the Arab Spring
uprisings in the Middle East.
" I believe it is best to let the free market decide and then
the producers and supply chain can work it out, " Vogel
said. " But given how tied wheat prices are to bread prices,
I think what Russia is doing right now is a better way than
banning exports completely. "
Zlochevskiy said the Russian government's interference
with grain trade does a disservice to its farmers.
" The government doesn't understand that we struggle
for the sales market, and they constantly hamper
farmers' motivation, " he said. " We saw this back in
2014 when we had begun supplying durum wheat to
the European Union. And at that moment, the government
introduced a floating export duty, which
primarily hurt the most expensive product items. All
products with a price above ($180) were subjected
to a 50% duty. This decision killed our exports of
durum wheat. There is no incentive for farmers to
grow it as long as no sales markets are available, so
World-Grain.com / World Grain / December 2021
farmers stopped investing in this segment. "
If not durum wheat, is there potential for Russian farmers
to become larger producers of other high-value grains
and oilseeds? Opinions are divided on the subject.
" By all means this is going to happen, " Zlochevskiy
said. " Motivation to grow wheat is going down, while to
grow soybeans, to the contrary, is rising. The demand for
corn is stable, primarily because livestock producers are
yet to realize its potential as a feedstuff. However, the time
RUSSIA NO STRANGER
TO GEOPOLITICAL ISSUES
IMPACTING TRADE
In a world that is divided politically by democratic and
autocratic governments, it's not unusual to see agricultural
trade disputes between countries with differing
philosophies. This has especially been the case with
Russia over the years.
In 1980, the United States, which at the time was a
major supplier of wheat to the Soviet Union, halted
shipments to Russia in protest of Russia's invasion of
Afghanistan. In 2014, Russia, in a much better position
from a grain reserves standpoint, banned high-value agricultural
imports from the United States and Western
European countries. The ban was Russia's response to
geopolitical tension with the West stemming from the
country's conflict with Ukraine.
Currently, political tensions between the United
States and China have resulted in some restriction of
trade between the two countries. Stefan Vogel, global
sector strategist for grain and oilseeds at Rabobank,
said it's possible that Russia, which is more politically
aligned with China, could see its trade flows altered due
to the China-US conflict.
" There was a study earlier this year about what would
happen if the trade wars between the US and China
worsen significantly to the point where the countries
barely traded with each other, " Vogel said. " It could be
a situation where you start to see blocs of trade with
the US, Australia and Europe in one bloc and Russia and
China forming a natural bloc on the other side. In that
case you could see a future where China would import
more wheat from Russia for feed and replace some corn.
" It is a situation where if there is further deterioration
of the situation, it could also involve countries sympathizing
with either the US or China, and the agricultural
sector could be heavily impacted by such moves. China
relies heavily on soy imports but that's not something
Russia can easily supply. "
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World Grain - December 2021

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