Volga Baikal AGRO NEWS Update on the Russian Grain Export Market !!!
The Russian government has approved and finalized the decisions to impose exports taxes above the previous decision to setup grain export quota, and this even with near-record grain harvest with more than 132 million tons.
How does this threaten the Russian agriculture and its participants?
Today, Martin Leu, founder and CEO of Leu-AGRO Group Switzerland and Volga Baikal AGRO LLC., its subsidiary in the Russian Federation, shares his view on the state regulation on export restriction and how it may affect the grain market and agriculture business in the whole.
Background: The Sub-Commission on Customs Tariff and Non-Tariff Regulation decided to set an export duty on wheat from March 01, 2021 up to the end of the season at 50 euros per ton, as well as to introduce duties on corn (25 euros) and barley (10 euros) starting from March 15, 2021. Overall grain export quota (Wheat-Barley-Corn) was previous set at 17.5 mmt till June 30, 2021.
It is explained that the decision is aimed at protecting the interests of the Russian domestic grain market and preventing the risks of new price hikes. However, earlier the announcement of the upcoming introduction of a duty on wheat at the level of 25 euros provoked a sharp increase in prices on the world markets.
– Martin, in your opinion, what will be the market reaction now?
For the domestic market, the introduction of a duty means a reduction in prices. The decline in prices can be extraordinarily strong given the relatively high stocks, especially in the Central and Volga regions, as the export market with a cap of 17.5 mmt will be oversupplied.
– What dynamics of prices — export and domestic – for grain do you predict in the nearest future and in a longer term?
In the domestic market, prices will be adjusted downwards. In the foreign market – everything depends on the overall demand and supply situation of the main exporting countries and the 2021 production forecast. We can already see that export prices for wheat have fallen because importers were not ready for such a price level (above $300 per ton). In my view the world export prices will go where supply and demand will push the market, and even with a grain export tax in place the market eventually will push farmgate prices around the globe higher, special if other production problems will occur.
I would like to add that today the grain crop production in russia is one of the most competitive globally and a very promising growing, economical important sector. Food inflation over the past year, according to ROSSTAT, amounted to 6.7%, mainly this inflation was due to fruit and vegetable products — if this it is excluded, the indicator will be 5.4% against 5% a year earlier. I am a strong believer in Russia Agriculture Grain Business Sector, the great progress over the last years will continue. Even with some curbs the growth and development of the agriculture sector will grow and generate great results for its participants.
Martin Leu was pleased to share his point of view on this matter.