Russia has to export grain at a huge discount

Photo: Mark Pasveer
Photo: Mark Pasveer

Russian grain exporters have to sell grain on the global market with a discount reaching $70 per tonne, due to a “significant concentration of risks,” Arkady Zlochevsky, president of the Russian Grain Union said during a press conference in Moscow.

Zlochevsky described the discount as “an astronomical figure” and “unprecedented for all times of our deliveries”.

“When Russia was just conquering the world wheat market, the discount ranged between $10 and $20 per tonne. Then, it was the norm, and we were eliminating this discount over a long period of time,” Zlochevsky said.

In 2021, Russia exported grain worth $8.9 billion, which comprised a third of the Russian overall food and agricultural export.

Russian grain: The last resort

Despite the strong demand and rising prices on the global grain market, customers turn to the Russian grain as a last resort. Even with the discount buyers look at the Russian grain only after assessing other options first, Zlochevsky added.

The problems are currently seen not only with the countries that imposed sanctions against Russia over its invasion of Ukraine. For instance, the Egyptian state company GASC has not included Russian grain in its last purchase, Zlochevsky said, adding that private Egyptian traders do import Russian grain.

“Egypt is not the only country that has reduced demand for our grain,” he added.

Rising shipping costs

Russian grain companies also experience major problems related to freight and logistics, Zlochevsky said. Freight has risen in price, like transportation insurance, which impacted the “potential of shipments”.

Over the past few months, the world’s leading insurance companies added all of Russia’s waters to the list of areas deemed high risk, which raised the cost of shipping and added to the logistical pressures on the country.

Forecast remains intact

Nevertheless, the Russian Grain Union still forecasts that the Russian grain export would reach 43 million tonnes in the 2021/22 season.

As of today, Russia exported 37 million tonnes of grain, including 32.5 million tonnes of wheat in the current season, Zlochevsky specified. The Russian Agricultural Ministry expected the Russian grain export to be close to 45 to 48 million tonnes.

Despite all challenges, the demand for the Russian grain remains high, said Elena Tyurina, Director of the Russian Grain Union’s analytical department.

“The geography of our deliveries is outlined. The Middle East and Africa are our target markets. We have no sanctions disagreements with them,” said Tyurina.

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