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Export duty will finish off Russian grain growers

The villagers ask to reset it and cancel the export quota

In 2022, Russia harvested a record grain harvest – about 157 million tons. Last year the figures were slightly lower, 142.5 million, of which 92.8 million tons of wheat. According to preliminary estimates by some experts, in 2024 it may be possible to surpass the results of two years ago. And the export potential could reach as much as 67 million tons. In general, wheat is our main “grain weapon.”

However, isn’t it too early for analysts to share the skin of an unkilled bear? The current sowing season is special. We are almost completely abandoning import supplies and intend to sow seeds of domestic selection.

The villagers ask to reset it to zero and cancel the export quota

Last December, the State Duma held a round table on the topic of legislative support for antimonopoly regulation of food exports. The event participants highlighted the main problems that prevent domestic farmers from developing and moving forward.

In particular, the very principle of export quotas limits exports and leads to an additional increase in carry-over grain stocks. The price of grain crops for peasants has dropped significantly.

In addition, tariff quotas are distributed on a historical basis, and new business entities do not have access to them. In some areas, grain growing enterprises do not receive export quotas at all.

Farmers also note a multiple decrease in export margins—profits per kilogram of grain. Compared to 2021, in 2022 it decreased by 27.7%.

Compared to 2021, purchases of agricultural machinery (tractors and combines) decreased by 19.3%.

The insurance rate for ships calling at Russian ports increased to 5% of the cost of the vessel…

It was noted that the price of grain transshipment in the ports of the North-West had increased – from 1000–1100 rubles to 2100–2400 rubles per ton. The price of offshore transshipment services per ton is 2 times lower than at the port. And the loading rate in small ports is 2 times less than loading at the sea terminal……

In total, deputies and invited guests named the 20 bottlenecks on the way of Russian grain exports to the final buyer. There was an unkind word about the export duty. Which simply strangles the peasants.

In general, it turns out that the duty, introduced three years ago, does not stimulate the development of grain production in the country, but slows down the implementation of the president’s instructions, expressed in his February Address, to increase exports of agricultural products by 1.5 times by 2030.< /p>

This topic was continued at the recently held 35th congress of AKKOR – the All-Russian Farmers Association. Its delegates wrote in an address to the president that “sales prices for grain have fallen significantly and costs have risen sharply. For the third year now, with record harvests, profitability has been falling, peasants are becoming poorer, not richer…”

And they asked the head of state to reset the export duty. “Otherwise, we may lose the high achievements in grain production that have been achieved through joint efforts in recent years.”

In general, the situation in the agricultural sector of the economy is not so rosy. Ordinary Russians, accustomed to agricultural records, are unlikely to realize that the agro-industrial complex faces such serious challenges.

The round table participants offered their recommendations for eliminating agricultural problems to the Government of the Russian Federation, the Ministry of Agriculture, the Federal Antimonopoly Service, the Ministry of Economic Development, the Ministry of Transport, as well as government authorities of the constituent entities of the Federation.

Sergey Lisovsky

We asked them to comment on Sergei Lisovsky, Deputy Chairman of the State Duma Committee for Protection of Competition.

– Yes, this is a serious problem. Export quotas were introduced three years ago. They are valid from February 15 to July 1, that is, until the start of the new agricultural season. The Ministry of Agriculture motivates this by the fact that such a measure makes it possible to monitor the grain market, maintain the country’s food security, so that farmers do not export excess goods abroad.

Such a danger really exists. But over the past 20 years it has arisen only three times. In recent years, we have had a surplus of grain, much more than is needed for domestic consumption. Today there is no need for such a mechanism.

Quotas are predominantly distributed among large traders, who become monopolists in the market and begin to dictate their terms. In some grain regions, only one trader receives an export permit. And taking advantage of his advantage, he immediately lowers the purchase price from the peasants. For example, 5 thousand rubles per ton of fodder. This is very little, but manufacturers also sell using it, because they have no other traders to turn to.

We need to return to the experience of three years ago, when quotas were given to everyone who had the opportunity to export goods. Three years ago access was free. And exports stopped only when the government said: “Stop, guys! The rest of the reserves are for the domestic market.” And this was fair.

Now there is no competition, only a few companies are engaged in export, which take advantage of their monopoly advantage.

“Unfortunately, the shortage remains. It should also be said that the department has allocated a quota for the purchase of imported seeds. Since the distribution of quotas was administrative, a few companies received the bulk of them, which became monopolists and immediately, approximately doubled, inflated prices. Especially for sugar beet and sunflower seeds.

The cost of planting material has increased; we need not talk about fuels and lubricants, electricity, agricultural machinery and other related seeding resources. Their price increase like sunrise and sunset.

As a result, the manufacturer's production costs will increase, and this will affect the buyer's pocket in stores.

— Formally, yes: money was seized from a specific manufacturer and then returned. But not to the one from whom it was confiscated, but simply to the village, “to the grandfather’s village.” And agricultural producers do not know who exactly gets them.

Sergey Lisovsky < /span>

There is an opinion that it is not for the peasants at all. Some analysts are confident that the money from the duty goes mainly to commercial banks to subsidize interest rates. Not to the villagers, but to the bankers – approximately 2/3 goes to them in the form of rate compensation.

The export duty directly affects the income of agricultural producers.

It was assumed that it would depend on the export price of grain, but not in Russia, but on the world market. Let's say 3rd grade wheat costs $230 per ton. From this amount the export duty itself (which goes to the state budget) is subtracted, then the cost of transshipment of cargo at a port or station, logistics along the entire route of the goods from point A to point B, taxes, and so on.

What remains as a dry residue goes into the pocket of the manufacturer. But this is a very small amount.

Since the duty is calculated from the export price in dollars, and its exchange rate against the ruble is growing, then, accordingly, the export duty itself is growing. Thus, the peasants are left with less and less.

— The calculation of duties is determined approximately like this: the average price per week, say, 235 dollars (according to the calculations of the Ministry of Agriculture), multiplied by the average dollar exchange rate for the week, take 92.5 for the calculation and subtract 17,000 (the price that should go to the manufacturer in 3- th class). Then 70% of this figure is taken, this is exactly the duty – 3315 rubles. But in reality, on world markets the market price is 200 dollars, and the duty should be 200 x 92.5 – 17,000 and subtract 70% = 1050!!! So why is it suddenly $235 on the stock exchange (in Russia)? Because the Ministry of Agriculture, according to exporters, advises all Russian market participants to register a price of 235 dollars (when the real price is 200, as I already said), and those who disobey may immediately lose their favor or receive some other punishment. As a result, since the real world price is 200 dollars, and the duty is set at 3,315 rubles, the peasant already has less left, not 17,000 rubles (which the Ministry of Agriculture is talking about), but 17,000 minus 2265 (the difference between the duty established by the Ministry of Agriculture and the calculated one) = 14,735! But this is not the case now, since in Russia there is a surplus of grain, huge carryover balances, the price for the third class has dropped below 11,000 rubles, fodder – 5,000-6,000 rubles. Initially, the duty was introduced to maintain balance within the country, it was calculated so that if the world price of grain is $200, it will be zero, and if the price rises, then the farmer receives 30% of the fee, and 70% goes to the state treasury. Perhaps, at some point, the ministry decided that it was possible not to pay attention to the market, and came up with fixing the price on the stock exchange higher than the real market price in the world, it turns out that much more is taken from the farmer than is declared in words! The Ministry of Agriculture also states that it is returning 2,000 rubles to peasants. per ton of grain sold for export, but in fact the money that is given to the regions is not enough to compensate everyone, and the regions are faced with the problem of either paying 2,000 rubles to only part of the farmers, or dividing this amount among all, as a result on average it turns out to be no more than 600 rubles. per ton!

Although this money is very conditional. Today, the price of 3rd class wheat fluctuates between 11–11.5 thousand rubles per ton. And 5th grade feed grain costs 5–6 thousand, which is lower than the cost of production. If in the southern regions of the country such a cost still somehow covers the costs, then in Central Russia, the Urals, Trans-Urals and Siberia there is no need to talk about profit.

Sergey Lisovsky

Peasants are not motivated to produce grain. More than half of them trade at a loss. This year, at the very least, they will drop out, and next year many will leave the field. Today Russia has the largest carry-over grain reserves. They have reached a historical maximum; they urgently need to be sold on foreign markets. At least in order to free up space in elevators for Harvest-24.

This means that wheat will become cheaper on the domestic market, producers will begin to sell it below cost and incur losses. The old harvest was not sold, the new one has not yet appeared, grain prices will only fall. This is the prospect.

— Due to low incomes, producers save on fertilizers, plant protection products, updating agricultural machinery… This situation has been visible in the last two years and leads to a decrease in yields and bankruptcy of small farms.

Land for sale, fertile land at that. If earlier, on the contrary, they were buying it, now they are selling it; medium and small businesses cannot withstand low grain prices. Farmers have small land plots, and they are located in hard-to-reach places. Large agricultural holdings do not need such plots, they will not buy them, give them large tracts, close to the road, they will not cultivate the plots. And small and medium-sized forms of business are rural areas, jobs, and village infrastructure.

As a result, not only will our productivity and gross harvest decrease, but our villages will also become empty, and from there today people are fleeing to the city.

“We are rightfully proud of our achievements.” At the same time, agriculture is a risky business; it depends on the weather, various diseases, the dollar exchange rate, and the general economic situation in the country. All these are risks, but of a tactical nature, which always happen – say, diesel fuel has risen in price or something else. Such situations are fixable.

And the trends emerging today are problems of a strategic nature. They “kill” not today and not tomorrow. This is a time bomb; it contains a system for destroying the village.

This is the difference between tactical and strategic problems.

The situation may become irreversible. And the government will have to pay tens, maybe hundreds of times more to restore lost ground. If a peasant leaves the land, he will never return.

—We also need to fight with her. The deep-water ports from which our crops are shipped to importing countries are now virtually single-handed. Today we have the highest price in the world for grain transshipment at ports. On average, this service costs 11-12 dollars per ton, and in Russia – 22-24.

Hopper cars for transporting crops are 80% owned by one company. The river fleet is also monopolized; over the year, tariffs there have increased from 20 to 40%. These monopolies also strangle the peasants.

Here I would draw an analogy with blood-sucking ticks that stick to a cow. They don't understand that when the cow dies, the ticks themselves die. If there are no farmers, then there will be no exports…

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