Authorities are reporting record grain gains from the current crop. Russia's statistics agency Rosstat reports that more than 150 million tons of grain were collected, against a forecast by the Ministry of Agriculture of 140 million tons. This could be an absolute record. At the same time, progress in exporting processed agricultural commodities is much more modest. Export of flour from Russia is more than 120 times lower than export of wheat.
And there aren't many prospects of at least increasing flour exports. The logistics of container sea exports from the Russian Federation are expensive and undeveloped, experts say, and storage times for processed products are much shorter than raw materials. Analysts say that Russia can only overcome the agricultural "raw material curse" by expanding domestic production.
The grain harvest in Russia has reached 140,2 million tons, Rosstat announced on Thursday. In turn, the collection of sunflower seeds was 3 million tons, sugar beets 13,408 million tons, potatoes 15 million tons. Collection of closed ground vegetables was 9,539 million tons.
The surpluses over domestic demand are now to be exported. The head of the Ministry of Agriculture, Dmitry Patrushev, announced that his agency would increase the size of the grain export quota. Its size is expected to be 25 million tons without being broken down into individual crops.
The independent newspaper from Russia reminds that the export quota is introduced annually in the second half of the agricultural season for the period from February 15 to June 30. Last agricultural year, the quota was 11 million tons, including 8 million tons of wheat and 3 million tons of barley and corn. The measure is intended to ensure food security of the Russian Federation, limit the increase in domestic grain prices, which can lead to increased cost and consumer prices for flour, bread, meat and milk. However, in the current year, the Russian Federation is reaping a bumper crop of grain, and especially wheat.
In terms of agricultural development, Russia is still a deeply resource-rich country that prefers to export its products abroad after preliminary processing. So, if by the end of 2021 about 38 million tons of grain were exported from the Russian Federation, the volume of flour exports, on the other hand, will be hundreds of times smaller.
About 2021 tons of wheat and rye flour were exported in 260.000, an increase of 3,3% compared to the previous year. The export turnover from this was 86,8 million US dollars. Wheat flour accounted for 97 percent of sales. The country only produced about 8,2 million tons of flour during the same period, accounting for just 2% of world production. Against the background of the current production and export of untreated grain, these are rather modest amounts. At the same time, the maximum volume of flour deliveries was set in 2019, when the Russian Federation exported 314,6 thousand tons for $103 million. The potential to increase exports of flour is relatively small. Experts from the "Agroexport" center at the Ministry of Agriculture estimated that the country can export up to 430 thousand tons of wheat flour per year at most.
However, the quantities of food processed in the country are constantly increasing. The head of the Ministry of Agriculture of the Russian Federation, Dmitry Patrushev, noted in early October that in fact deliveries of flour this year have almost quadrupled, without mentioning the volume actually delivered. A similar trend is also being followed in other segments of the agri-industrial complex (AGRAR). For example, last year Russia earned more than $36 billion from agricultural exports, reports «Agroexport». Grains were exported in volume by 11 billion dollars, oil products - for 7 billion dollars, fish and seafood - 5,2 billion dollars. Food and processing industry exports totaled $4,7 billion.
A positive dynamic is also observed in the area of individual product categories. For example, in 2021 Russia exported $1,6 billion worth of confectionery. The supply volume has increased by 56% within four years. Chocolate was exported for 872 million dollars, flour confectionery - for 557 million dollars, sugary products - 210 million, calculated in «Agroexport». The volume of confectionery exports amounted to 824 thousand tons of products, an increase of 19% compared to the previous year was estimated by the association of confectionery companies. This year, the country is expected to supply $1,7 billion in confectionery. At the beginning of October, the country exported confectionery in kind by almost 390 thousand tons, in money – over 946 million dollars., reported the Federal Customs Service of Russia.
High yields at harvest are becoming a kind of problem for Russia. The Russian Grain Union (RZS) has recognized that farmers lose up to 5-7% of their grain harvest annually due to a lack of post-processing and storage capacity. At the same time, grain losses begin to form in the field during harvesting. At this stage, up to 2-3% of the grain is lost, mainly due to the wear and tear of grain technology and the lower number of arable land per hectare compared to other countries. The Union reported that the total storage capacity of grain in the Russian Federation is 146,8 million tons. Agricultural producers account for more than half of them – 82 million tons. "The quality of storage is 47,4 million tons and 17,4 million tons, the rest 82 million tons is short-term storage, this is primarily grain," RZS explained. At the same time, grain losses of 15% could be achieved this year due to yield increases, was not ruled out in the Union.
Experts from the publishing house Independent Newspaper are sure: the chances of the Russian Federation to make a profit from the supply of agricultural products with deeper processing are minimal. “The whole question is what are they willing to buy in the world market. The main buyers of Russian grain are Turkey, Egypt, Iran, Saudi Arabia, China, Bangladesh, Kazakhstan. Grain is bought primarily to feed the least affluent sections of the population, ie not the most solvent. The processing capacities of these countries have their own. If Russia reduces grain exports, the above countries will not buy flour from Russia - they will buy grain from other countries/suppliers. And we have a surplus on the domestic market, so next year farmers will simply sow less,” emphasizes the expert of the company «Yva Partners» Artem Klyukin. He emphasizes: For the world market, it is the norm that the supply of "raw materials" prevails there.
In addition, according to Denis Ternovsky, senior scientist at the Center for Agricultural Support Policy, wheat exports in world trade cannot be fully replaced by the export of primary processed products. “Grain is a more convenient product to store and transport. And for example, the world market for flour is only about 7% in physical and 11% in value of the global wheat market,” he reports.
“In contrast to the supply of agricultural commodities, many types of processing products require special conditions and limited storage times, methods of packaging, handling, transportation, etc. Faced with a number of problems that prevent sustainable profit from activities related to the supply of agricultural commodities products to countries that are located at a great distance from Russian ports, manufacturers and exporters are particularly not interested in such operations,” explains Professor of the Russian University of Economics by the name of Academician Plekhanov Ibrahim Ramazanov.
ICAR experts point out that Russia can export grain up to 50-100 million tons, and flour can even theoretically export only 5 million tons per grain. “Many processed products have a much shorter shelf life than the raw materials. And the logistics of container sea export from Russia is very expensive and undeveloped. And it's much more expensive than most of the competing countries - Ukraine, Turkey, the EU, China, the USA etc.” they say.
However, Russia does not only export raw materials. “The export of feed for pets and feed in general has grown intensively in recent years, the export of meat has increased many times – and these are processed grain products,” Klukin draws attention to. The expert believes that Russia needs to further expand agricultural production. “If the volume of agricultural production in Russia as a whole will increase noticeably on the domestic market, the price will fall again, which will increase the return on investment in the processing industry for domestic food production,” — the analyst believes. To become a strong global player in the food industry, cheaper credit resources and access to advanced manufacturing and management technologies are needed, says TeleTrade analyst Alexey Fedorov.
Source: INDEPENDENT NEWSPAPER (Russian)