World Grain - May 2023 - 26

FEATURE: SANCTIONS WEIGH ON RUSSIA GRAIN SECTOR
In 2023, the Russian wheat industry's average
profitability is expected to plummet by 60% compared
with the previous season and nearly threefold compared
with 2020-21, according to a marketing study.
strophic slump in prices from 30,000 roubles ($340) to
20,000 ($220) roubles per tonne.
In theory, soybeans may become the most profitable
crop for Russian grain producers next season, but there
are no guarantees.
" Many relied on oilseeds but look at the state of the
current oil market, " Zlochevsky said. " Oil prices have
fallen since (sunflower) oil is dependent on global oil
prices, which are now down as two banks collapsed in
the US. "
He said uncertainty remains exceptionally high in
such conditions.
In an optimistic scenario, Russia could export more
than 60 million tonnes of grain this year, Zlochevsky
said. However, he admitted that while the available
infrastructure would allow for that, and even though
prices on the global market remain more attractive, the
floating export duty imposed by the government in July
2022 means farmers can't compensate for the losses
they suffer from selling grain on the domestic market.
" The whole marginality is being eaten up by duties, "
he said. " In fact, if there were no duties, the exporters'
marginality would be in a normal state, and everything
would roll swiftly, as it was before. "
Russian grain farmers have lost around 1 trillion
roubles ($15 billion) due to the floating export duty,
Zlochevsky said. The losses the farmers suffer on the
domestic market due to lower prices are much higher
than that figure, he added.
Russian grain farmers have repeatedly called on the
authorities to abandon the duty, claiming it performs
solely a fiscal function - collecting money for the
state budget. Russian officials, however, argue that the
duty is needed to control prices on the domestic market
and, consequently, to tame food inflation. Russian
farmers, in turn, believe there are more effective tools
to achieve that goal.
However, it appears likely that the floating duty will
remain in place. In fact, Russia is planning to wrest
more money from some commodity producers and state
companies. Russian Finance Minister Anatoly Siluanov
recently disclosed that the government seeks to collect
300 billion roubles ($3.5 billion) as a one-time voluntary
contribution from a business. This contribution is sought
to cover the country's staggering budget deficit.
26
The Russian federal budget deficit for January and
February 2023 was almost 2.6 trillion roubles ($45 billion),
already 88% of the budget planned for the whole
year. The deficit was attributed to reduced oil and gas
revenues and increased spending. Struggling against
the looming financial crisis, the government also has
discussed raising the income tax. The new measures,
if approved, will lay a weighty burden on the already
troubled Russian grain farmers.
Western firms exiting Russia
The leading Western grain traders' recent decision
to exit Russia is likely signaling that the government
wants to consolidate control over grain exports.
Viterra and Cargill reportedly will stop selling
Russian grain at the beginning of the 2023-24 marketing
season (July). The Russian media reported that
Western grain companies faced some administrative
pressure to leave Russia, though this information has
not been confirmed officially.
In December 2022, the governors of three Russian
regions appealed to Russian President Vladimir Putin,
urging him " to strengthen state control in the field of
grain exports, " including by restricting operations of
foreign business in this industry.
The Russian newspaper, Expert, reported in March,
citing its own sources, that the Russian veterinary body
Rosselhoznadzor suspended granting export certificates
to Viterra, Cargill and other Western companies
operating in the grain market, which technically made
it impossible for them to continue operation.
There is no clarity as to why the Russian authorities
moved to push foreign traders from the grain
market, but Expert said the industry is likely moving
toward nationalization, adding that " the topic of food
and international trade in it has become an element of
big politics, and an important component of Russian
diplomacy. "
The publication said " the effectiveness of total state
control of the grain industry, " like in the days of the
Soviet Union, is far from obvious, but it looks like
those days may be returning.
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May 2023 / World Grain / World-Grain.com
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World Grain - May 2023

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