Arkady Zlochevsky: “Why should farmers produce grain if they can’t sell it?”
The Ministry of Agriculture announced the preliminary results of the current battle for the harvest: domestic farmers have already harvested 147 million tons of grain. Throughout history, there was more only last year – about 158 million tons. But a rich grain harvest is not yet an indicator of a healthy market. The results of sowing can be “painted on”, but nothing can be said about the problems of the agro-industrial complex. For example, that even regular buyers of our grain, such as Turkey and Egypt, are losing interest in the Russian product. The reason is uncompetitive prices. And for Russian peasants the question arises: why produce if you can’t sell and make money? President of the Russian Grain Union (RGU) Arkady Zlochevsky told MK what is happening on the agricultural market now and what to expect in the near future.
Photo: Global Look Press
— There will be no new record. Please note that the figures that the Ministry of Agriculture has now presented apply to both old and new territories of the country. And the result for 2022—158 million tons—was achieved without taking into account new territories. There is no correct comparison here. If we do not take new territories into account, then, according to the Ministry of Agriculture, 140 million tons have already been collected, and we at RZS predict 145 million tons. No matter what you think, we won’t achieve a record, but we can definitely say that it will be the second result in history. The increase is mainly due to corn, which is showing a crazy harvest this season.
— I think this interpretation about the fall in the share of quality grain is incorrect. The numbers mentioned are a completely normal range for food wheat. But last year this figure went beyond the usual. Our standard share of food wheat is 68-76%. A drop from 80% to 72% is just a return to the usual range. Taking into account the fact that the wheat harvest will be the second in history — more than 92 million tons — I assure you: there will be enough food for our eyes.
As for the desire of the Ministry of Agriculture to ban the export of durum wheat, this will lead to farmers stopping producing it. Why do farmers need this if they cannot sell grain? Meanwhile, durum wheat requires separate investments: it is a very troublesome crop. We sell the product mainly to Italy. Yes, yes, despite the sanctions, Italy continues to buy durum wheat from us, which is used only for pasta. If exports are banned, then a golden time will come for domestic pasta producers: grain prices will fall and less money will be spent on purchases. But this will not last long: in the end, farmers will simply stop producing durum wheat because it is unprofitable.
— You should address this question not to the RZS, but to the Ministry of Agriculture. We are not the ones who ban exports…
— Data from the regions that the Ministry of Agriculture is currently receiving indicate that there is an increase in sown areas. The Ministry of Agriculture’s plan is 20 million hectares. Meanwhile, last year the plan was 19 million and then we also received brave reports from the regions that this is exactly how much was eliminated. However, in the end it turned out that 17.2 million hectares had been developed. Despite the fact that only about 3-5% of crops were lost and there were no weather disasters. It turns out that 19 million was not there initially. Statistics are collected by regional administrations and local agricultural authorities. They submit data to the Ministry of Agriculture. Accordingly, they put pressure on the peasants with threats that subsidies will not be paid, there will be no support, and there will be no areas themselves. So the farmers “draw” the numbers they need.
— Turkey, Iran, Egypt — the main buyers of Russian grain — are still with us. However, export dynamics have declined sharply in recent weeks. Now, let's be careful, there is not very active demand for our grain. However, 65 million tons is, in principle, a real figure. I would like to hope that we will eventually find it.
— It will not affect you in any way and will not help in any way. These are very small volumes that, in a global sense, will not affect anything.
— Why are exports declining? The Ministry of Agriculture gave an unspoken command — not to sell grain for less than $270 per ton. This attitude led to failures in tenders and the cancellation of already concluded contracts. This is what reduces exports. For example, one of the Russian companies had a contract with an import buyer for 450 thousand tons terminated. This was a good volume, but after checking it turned out that the price in the contract was below $270 per ton. As a result, at the command of the Ministry of Agriculture, this contract was canceled: the grain was not sold, nothing was earned. Plus, we lost several tenders in Algeria and Egypt. Because all Russian companies had a price that was strictly $270 per ton. Other suppliers, naturally, sold cheaper. Our regular customers are already switching to other sellers. Egypt began to buy less, and Türkiye too. Iran is holding out for now. And they switch to those with competitive prices: some to France, some to Australia. But we must give the Ministry of Agriculture its due; after assessing what was happening, it seemed to lift the price limit on exports of $270. But we have already lost the pace of sales, and our clients have partially switched to other sellers.
— Losses are formed based on their safety economy, which now looks disgusting in Russia. That is, the cost of storing grain does not pay off at all. The harvest is large, carryover stocks are large, so grain prices are falling. But storage requires funds — and considerable ones. Let's say that in the fall the farmer put his grain in the elevator and paid every month for its storage in good conditions. By spring, the price of grain traditionally rose, the farmer sold it and repaid storage costs. Now the logic is non-standard. Grain prices are falling. In the long run, preservation doesn't pay off. Why spend money on elevators if a peasant can simply put grain in a barn? Yes, during the winter some of the grain will deteriorate due to pests, it will lose quality and quantity, but storage will be free. The logic here is: “We grow a lot. And if part disappears, well, what can you do, it doesn’t matter”…
— I’m not an oracle. It is difficult to talk about forecasts with such unpredictable conditions and decisions of regulatory authorities as ours. For now, the downward trend in prices continues, and there is no reason to believe that the cost of wheat will increase.