Post sponsored by NewzEngine.com

MIL OSI Translation. Region: Russian Federation –

On February 15, restrictions on grain exports began to operate in Russia. Until July 1, 2021, a tariff quota will be in effect: 17.5 million tons of grain – wheat, rye, barley and corn – are allowed to be exported. Exports in excess of this volume will be subject to a duty of 50% of the customs value, but not less than EUR 100 per ton.

In addition, an export duty on wheat has been introduced within the quota since February 15. Until March 1, it will be 25 euros per ton. After that, it will be increased to 50 euros per ton. Export duties on corn (25 euros per tonne) and barley (10 euros per tonne) will also be introduced from 15 March.

And from June 2 for wheat, corn and barley, the permanent mechanism of the “grain damper” will work. The first part of the mechanism implies a floating duty on these crops, which will be calculated based on world prices.

For wheat with a world price of up to $ 200 per ton, the duty will not be charged. If the price is higher, the duty will be 70% of the difference between the world and the base $ 200. For corn and barley, the same calculation principle will apply, only the non-taxable base will be $ 185 per ton. Market participants will be required to provide data on contract prices to the Moscow Exchange. The flexible duty will be calculated weekly based on the previous week’s price data. The exchange will begin registering export contracts and publishing prices from April 1.

The second part of the “grain damper” mechanism is the return of funds received through the export duty to farmers. They are compensated for part of the costs of producing and selling grain at a rate per ton of products sold. Financing is planned to be distributed between regions depending on their share in gross grain production. But for the Siberian and Far Eastern regions, increasing coefficients will be applied. The regions will already distribute these funds to agrarians. According to the calculations of the Ministry of Agriculture, in this way about 40 billion rubles may return to agricultural producers in 2021. According to the government, due to state support, grain market participants will be able to compensate up to 50% of production costs.

Such a “grain damper” mechanism should prevent the growth of prices for grain on the Russian market (and for final products – flour and bread), create long-term conditions for the grain industry and attract additional investment in it, the government hopes.

According to the Chairman of the Board of the Union of Grain Exporters Eduard Zernin, a consistently high rate of grain export has been observed since the beginning of the year – market participants tried to fulfill their obligations under contracts before the introduction of duties. At the same time, according to his assessment, it was not possible to ship the entire planned volume due to the numerous storm warnings typical for this time of year.

“Due to weather conditions, quite a lot of boats remained in the roads. Plus, there are about 370 thousand tons of wheat under loading. Apparently, we will be loading all February,” he said.

Despite the fact that from today exporters will have to pay 25 euros per ton, farmers in the south are still trying not to slow down, since 25 euros is better than 50 euros, the expert says. Export contracts, taking into account the duty, already exist, as domestic grain prices are actively declining, Zernin adds.

According to Igor Pavensky, head of the Rusagrotrans analytical center, in the center of Russia, wheat prices have already dropped to 14,000 rubles excluding VAT from processors, and there have been transactions for 13,000 rubles at a duty of 50 euros. Given that in October last year, prices reached 18 thousand rubles per ton. According to Pavensky, from the beginning of the season to mid-February, Russia has exported 30.6 million tons of wheat (excluding the EAEU). Last year, on the same date, 23.7 million tons were supplied to foreign markets. According to the expert’s forecasts, the total export of wheat in the 2020/2021 season will amount to 36.7 million tons excluding the EAEU and 38.4 million tons together with the EAEU.

Meanwhile, according to Dmitry Rylko, Director General of the Institute of Agrarian Market, the farmers will receive less than $ 1.55 billion in revenue due to the introduction of the “grain damper”. With a wheat price of $ 250 per ton of wheat (this price seems adequate at the start of the new season) and a harvest of 77 million tons, the industry loses about $ 1.33 billion. For barley at a price of $ 215 per ton and a harvest of 19.5 million tons, losses may amount to $ 95 million, for corn – at a cost of $ 225 per ton, losses are estimated at $ 126 million, the expert calculated at the “Where is the Margin” conference on February 12. At the same time, according to him, the state will not be able to compensate the agrarians for all the losses from the duty.

“When we set the export duty, the fall in wheat prices occurs throughout the country. Thus, the revenue of all grain producers is reduced, regardless of who and where they sell the crop,” Rylko explained.

It is also unclear how exporters will work if the export duty changes weekly.

“The overwhelming majority of our contracts are contracts for a much longer period. If you won the Egyptian tender, then the grain must be delivered in a month and a half, and you do not know the duty,” he said.

In addition, according to Rylko, it is wrong to calculate the duty only on the basis of the Black Sea contracts and apply a single one for all other bases, as well as all types and classes of wheat.

A source: Russian newspaper

EDITOR’S NOTE: This article is a translation. Apologies should the grammar and / or sentence structure not be perfect.

MIL OSI Russia News