Russian grain industry suffers losses from export restrictions

13-07-2022 | |
Photo: Canva
Photo: Canva

The Russian grain industry is expected to lose billions of dollars due to export restrictions this year, Arkady Zlochevsky, president of the Russian Grain Union said during a press conference. Russian grain farmers ask the authorities to abolish floating grain export duty, as it hampers their margins, and jeopardizes future harvests.

“Duties and quotas primarily restrict access to markets. A loss of liquidity leads to the fact that money falls out of the grain farmers’ pockets. This demotivates producers, which is why we insist on abolishing duties,” Zlochevsky said, suggesting that if the government wants more grain to stay in the country it should limit export volumes.

Lack of money

“The duty now performs a fiscal function,” Zlochevsky said, estimating that it cost grain farmers around $2 billion. “The withdrawal of that money makes it impossible to buy the necessary resources for sowing work. [Overall] farmers have lost income 3 times exceeding the mentioned amount. Already in the autumn, we will feel an acute shortage of money in farmers’ pockets to maintain the technological level and production base.”

Conversion to state aid never happened

When the government introduced the import duty in early 2022, it promised to return the collected funds in a form of state aid. However, so far, this hasn’t happened.

“The money is distributed among livestock breeders, bakers and processors, that is, those who have already received benefits from reduced domestic prices. They are not returned to those who actually lost their income. The Agricultural Ministry insists on extending the duties. Under such a policy, we will inevitably feel a drop in [grain] production,” Zlochevsky said.

No record-breaking harvest is expected

Zlochevsky also dismissed forecasts voiced by the Russian Agricultural Ministry that this year’s harvest is expected to hit 140 million tonnes. He explained that the actual and the declared figures are likely to be different since regional authorities used to exaggerate harvest in order to beat the government plan.

“[Government agencies] will report on 130 million tonnes. Still, they will not dare to declare a record of 140 million. And in fact, it will be a little more than 120 million tonnes, maybe 121 to122 million tonnes. On wheat they can report about a record of 87 million tonnes,” Zlochevsky said, adding that this figure would be in line with the target set by Russian President Vladimir Putin to collect a record-breaking wheat harvest this year.

“In reality, the wheat harvest will not exceed 80-82 million tonnes. Thus, we will have a harvest at the last year’s level, and this is actually a good figure, but not a record,” he added.

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Vladislav Vorotnikov Eastern European correspondent