Grain producers are asking for a refund of export duties
Grain producers are asking for a refund of floating export duties (damper – “Vedomosti”) in the form of subsidies, as well as to increase the volume of soft loans. The Union of Grain Exporters addressed a letter to Prime Minister Mikhail Mishustin. Vedomosti got acquainted with him. A union representative confirmed his dispatch. Requests to the Russian government and the Ministry of Agriculture went unanswered.
In the situation of the current grain damper (the current duty on grain exports is, according to the Ministry of Agriculture, $ 88.2 per 1 ton), farmers can hardly compensate for the increase in the cost of goods by raising world prices, the letter said. It also says that the latest increase in the key rate (up to 20%) “finally deprives farmers of the opportunity to produce competitive products.” The Union agrees that the damper mechanism is still relevant for curbing domestic prices and stockpiling, but it requires targeted changes.
The perpetual grain damper, which is calculated on the basis of indicative prices each week, has been in force since June 2021, the mechanism itself is necessary to reduce domestic prices for grain and sunflower oil. For example, the current rates for the last week are based on the value of wheat at $ 326.1 per 1 ton, barley – $ 288.4, corn – $ 260.3. In addition, from February 15 to June 30 in Russia there is a quota for grain exports in the amount of 11 million tons, this measure is introduced annually since 2020 to protect against sharp fluctuations in world market prices, last year it amounted to 17.5 million tons , and in 2020 – 7 million tons.
The combination of quota, damper and record key rate threatens future harvest, say experts interviewed by Vedomosti. In order to keep grain production at the level necessary to ensure national food security, exporters are asked to use additional income from the damper to subsidize farmers, the letter said. According to the president of the Russian Grain Union Alexander Korbut, about 100 billion rubles were seized from the industry. in the form of customs duty and at least as much due to lower prices in the domestic market.
Neither exporters nor grain producers have given any additional income to the budget, this is a speculative calculation, says the chairman of the board of the Union of Grain Exporters Eduard Zernin. According to him, “the world market in high demand has swallowed our duty in price.” He is against the abolition of the duty, in part because external prices could fall because of it. According to Zernin, it will be even worse if key importers (among them Egypt, Turkey, Kazakhstan, Saudi Arabia) take a wait-and-see attitude and reduce purchases, which are already virtually zero due to geopolitics. In most countries, the harvest campaign starts earlier than in Russia, so they can provide for themselves for a certain period, he recalls. In this case, the price of Black Sea grain will not only be adjusted by the amount of duty, but may fall even lower, and then Russian exporters will suffer real losses.
The index of purchase prices of wheat in deep-water ports, calculated by the Union of Grain Exporters, despite the growth of foreign exchange rates, decreased from February 1, 2022 by 3.8% (from 16,420 rubles to 15,800 rubles per ton). Exporters do not see demand for Russian grain and do not expect it in the near future due to geopolitical risks, Zernin continues. According to him, they reduce purchasing activity in the domestic market. “We need to get out of the duty regime smoothly if we want to maintain foreign exchange earnings from grain exports, so we offer a point-by-point adjustment of the mechanism for calculating duties,” – sums up the expert. It is vital to return money to the industry, to the working capital of farmers against the background of rising costs of resources and loans, otherwise there will be a threat to the harvest: spring sowing may not go very well and there may be problems with winter conservation, says Korbut.
The Union of Grain Exporters asks to allocate more money from the budget for soft loans to farmers in addition to the already agreed 100.4 billion rubles, as well as to finance 100% of the key rate on them (now financed 70%). The Ministry of Agriculture, apparently, heard the farmers. On March 1, he published a bill according to which rates on short-term loans (for example, for the purchase of seeds, fertilizers, fuel, etc.) will be 100% subsidized from February 15. The document also stipulates that borrowers will be able to ask banks for a six-month deferral of payments on the principal debt from March 1 to the end of May 2022.
The Union also requests that a single level of export duty be set instead of the floating duty of $ 90 per tonne at a price of $ 250 and not levied at all if prices fall below. According to the forecast of the Ministry of Agriculture, grain exports in this agricultural year (July 2021 – June 2022) will amount to 45-48 million tons (including 37 million tons of wheat, according to the Center for Grain Quality Assessment). In the last agricultural year (ended June 30, 2021), 49 million tons were exported, including 38.4 million tons of wheat.