There will be no more discounts for wheat sales
The grain deal between Russia and Ukraine lasted exactly one year. Moscow announced that it was withdrawing from the “Black Sea Initiative” from July 18, 2023. We asked independent agricultural expert Alexander Korbut about how the situation on the global grain and food market has changed.
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— Let's start with the fact that Russia has not completely closed the door to the grain deal, — says Korbut, — If our requirements and conditions are met, we will return to it. The conditions are well known: in particular, the connection of the Russian Agricultural Bank to the SWIFT system, the unblocking of transport logistics, the supply of spare parts for agricultural machinery … The issue has been resolved on the Togliatti-Odessa ammonia pipeline, which was destroyed by the Ukrainian side. By December, we will redirect ammonia along another route: Togliatti-Taman.
— When the West shouts that Moscow has ruined everything and the world will now disappear, this is speculation. Western partners are behaving, from my point of view, like thimblers who have taken away the ball in the glass.
Now about the consequences. Most likely, the prices for grains and sunflower oil in the world will rise. However, their growth will be insignificant. Yesterday, July 17, on the Chicago stock exchange for wheat, they first squeezed up, and then fell sharply below the starting level.
You have to wait a week or two. Let's take into account that at the beginning of the season, wheat prices always rise — both in our country and in the world. They reach up to 400 or more dollars per ton. And now they are 240-250. For the global market, this is not at all critical, especially since grain prices in the world have been steadily declining for 5 consecutive months.
— First of all, it will increase export prices. And our country is one of the largest grain exporters. Over the past agricultural season, we delivered more than 60 million tons, which is close to domestic consumption in Russia. If export prices rise, purchase prices from domestic agricultural producers will also increase. Our peasants will have a little more money, because the floating duty eats up their income. Although duties will probably increase too.
— Here you can not oppose anyone to anyone. The state will benefit from higher export prices through duties. Exporters will at least keep their margins, and maybe even increase them. Margins have been record high lately, making grain exports very attractive. Part of the money will go to the peasants. It is fundamentally important for us that domestic farmers increase profitability. Export and income are impossible if there is no efficient production.
— What is a discount? This is the difference between the prices for French wheat (as a rule, it is taken as a basis) and Russian. Before all these events, our bread was always sold at a premium to French, with a plus. We sold more expensive and bought from us. We have not dumped on the grain market, we have not been doing this for the last 15 years.
— This is not dumping, but a forced measure. Sanctions against Russian food, which allegedly do not exist, actually existed. Both in terms of mutual settlements with partners, and in terms of the cost of cargo insurance … Accordingly, buyers told us that, for example, in France, wheat is more expensive, but there are no risks. We had to give a discount. Imagine: we shipped 60 million tons of grain with different discounts — from 10 to 70 dollars per ton. If we take the average value of $ 20, then we lost more than a billion. Accordingly, now, after the end of the transaction, these funds will flow into our economy. This is very good!
— Let's put it this way: we supplied crops to African and other distressed countries both before the grain deal and during it, and we will continue to deliver. And we ship more than Ukraine. It has one of the largest buyers of grain — Bangladesh, 1.1 million tons. And we sold 1.6 million there. Feel the difference! Plus, we are actively shipping to Ethiopia, Sudan, and Somalia…
In addition to laying straws for African countries, a decision was made to allocate $10 million to them to buy Russian grain. For recipients, this is a free product, in fact, humanitarian aid.
— Last season, the situation there was very difficult. Due to the high harvest, Ukraine has accumulated huge carry-over stocks. But they unloaded this grain, about 33 million tons went by sea in the grain deal. Part was taken out along the land corridor. Part of it to Romania, and from there by large vessels to other consumers.
It should be noted that Ukraine dumped prices terribly, dropping 40-50 dollars more per ton than Russia. Although, as I said, our dumping was a necessary measure. This year, the harvest in Ukraine will be objectively lower, and, accordingly, the export potential will also be. I think that they will be able to export significant volumes through the land corridor, especially since significant deliveries were made to the EU countries.