Photo: http://tass.ru
The record-breaking harvest of crops is a victory for all domestic grain growers that will be even more complete if we manage to ensure the preservation of the harvest and full export to the countries that are waiting for Russian wheat.
Record of 2017 is Broken
The Russian agrarians gathered a record harvest of grain crops in 2022, as reported by Minister of Agriculture Dmitry Patrushev during the government hour at the State Duma on December 14. According to him, the record harvest was more than 159 million tons in bunker weight and about 150 million tons in net weight. Bunker weight, also called initial or initial-entry weight, is the result of direct weighing of grain from the field, when the trucks bring the harvest to the grain collecting point after threshing. After shrinkage and desiccation the net weight is a little less.
According to Patrushev, the previous record was set in 2017, when the Russian farmers harvested 135.5 million tons of grain. According to the head of the Ministry of Agriculture, this year's harvest is 30 million tons more than last year, when 120.65 million tons of grain were threshed. The increase of 30 million tons is mostly wheat. Producers of wheat also set a record, having threshed 105.3 million tons, which is almost 30 million more than last year, when 76 million tons were threshed.
On the same day, Russian President Vladimir Putin, giving a speech at a meeting of the Council for Strategic Development and National Projects, said that Russia had already exported 22 million tons of grain by this point.
“Russia has exported about 22 million tons of grain, mainly to Asia and Africa, in the last five months alone. By the end of this year, we are ready to supply another 4-5 million tons of grain, and by the end of the agricultural year, that is, by June 30, 2023, taking into account the record harvest – and we do have a record-breaking harvest, and I would like to congratulate farmers again – we can bring the total volume of exports to 50 million tons,” Putin said.
According to the Ministry of Agriculture’s estimates, the harvest was expected be about 130 million tons. The projection, made by Deputy Prime Minister Victoria Abramchenko, turned out to be the closest to the real situation. She previously called the figure at about 150 million tons, specifying that Russia would be able to export about 50 million tons of grain.
Grain harvest in Russia in 2017 – 2022 was the following:
- about 150.0 million tons, including 105.3 million tons of wheat (data from Agriculture Minister Patrushev) in 2022;
- 120.65 million tons (data by Patrushev) in 2021;
121.3 million tons (data by Rosstat), of which 76.0 million tons of wheat;
- 133.465 million tons, including 85.696 million tons of wheat (Rosstat data), in 2020;
- 121.2 million tons, including 74.45 million tons of wheat (Rosstat data), in 2019;
- 113.2 million tons, including 72.1 million tons of wheat (Rosstat data), in 2018;
- 135.539 million tons, including 86.003 million tons of wheat (Rosstat data), in 2017.
Downside of Record Harvest
As practice shows, a record crop is a good thing, but there are some questions. Firstly, a record harvest is a decrease in prices on the market. Secondly, the harvest needs to be saved. And, thirdly, due to the sanctions of the collective West, there are obstacles in the way of Russian exports.
Oleg Pakhomov, the Head of the management consulting practice of Delovoy Profil Group, writes in his article on the problems of the Russian agro-industrial complex that the record harvests resulted in a surplus of grain on the market. Pakhomov notes that due to this fact, there is a significant drop in prices on the market which often prevents agricultural producers from covering their production costs. Maybe they should store the grain until better days?
But there is also a problem with this. According to Pakhomov, only 50% of granaries can store grain for more than six months.
“Grain producers suspend sales, preferring to store it in anticipation of higher prices. In spite of the fact that 150 million tons of grain can be stored in Russian granaries only half of them can store grain for more than 6 months, others cannot provide long-term storage without serious quality losses,” Pakhomov said.
According to Pakhomov, to increase profitability and unload granaries, exports should be encouraged but Western sanctions are standing in the way of Russian exports.
“Anti-Russian sanctions have a negative impact on the domestic agricultural sector, making settlements difficult, forming logistical problems, and increasing the shipment distance. Grain producers experience difficulties with freight of grain carriers, cargo insurance and transshipment in foreign ports,” Pakhomov said.
“To somewhat reduce the negative impact of sanctions should help to organize a system of accessible to foreign buyers of ruble payments for delivered grain, which the Russian government in cooperation with the Central Bank plans to run from the beginning of next year. However, this innovation may not solve the problems of exporters of other agricultural products,” Pakhomov said.
Ksenia Bolomatova, deputy director of the United Grain Company, said at the Agrotrends of Russia 2022-2023 conference that in 2022-2023 agricultural year, if there were no sanctions, Russia could export more than 60 million tons of grain. According to Bolomatova's estimates, under current conditions, exports could amount to about 54 million tons of grain.
Bolomatova explained that difficulties when exporting grain from Russia arise because of latent restrictions, even though the United States and other Western countries have not announced sanctions against Russian grain. At the same time, according to Deputy Director of UPC, export dynamics became positive thanks to the work of Russian authorities. And if at the beginning of the export season the rate of shipments decreased compared to last year, since October 2022 there is an outstripping rate of grain exports from Russia.
“Export shipments last year to date were 22.3 to 22.5 million tons, and this year it is already 22.7 to 22.9 million tons. We see that the situation is good, and we expect December to be record-breaking,” Bolomatova said.
Reporting Victory, but not Ignoring Problems
Yet, the export volumes above are rather an indication that there are still some issues. If this year's harvest is 30 million tons more than last year, export volumes will be higher. Actually, as Bolomatova said, by the end of November, the export volume is about the same (plus or minus 400,000 tons, which is not a big deal) as it was last year. That is, there is a slippage in the export of Russian grains.
President Vladimir Putin, Foreign Minister Sergey Lavrov and Russian grain traders spoke directly about the problems with grain export in autumn.
Moreover, the U.S. did not directly announce sanctions against Russian grain exports. There are more subtle methods, such as banning the insurance of dry-cargo ships with grain that are transported by sea. We could see how this works in practice in November, when the Kremlin announced the suspension of the grain deal. On the first day in Ukraine, people were celebrating the “victory” after several ships with the grain contracted earlier were dispatched from Odessa anyway. The next day, the British insurance company Lloyd's Ascot announced that it could not insure grain cargoes without Russia's permission, and the joy came to ought.
As we can see, the situation has improved since then, but there is still a lag. Finally, the record harvest figures clearly show why the Russian leadership is so interested in the so called grain deal.
Despite the sanctions, the U.S. Department of Agriculture predicted back in the summer that in the 2022-2023 marketing year, Russia will become the world's largest exporter of wheat with an indicator of about 39 million tons, which would be 18% more than the previous period. At the same time, the key buyer of Russian grain is Turkey, which will buy about 3 million tons by that time, says the analytical center of CW Group.
All this means that the Russian Federation is very motivated to prolong the grain deal.
Top 10 countries that are the largest exporters of grain in the world according to the LinDeal website (2021 - 2022 marketing year):
1) Russian Federation - 30.0;
2) U.S. - 26.0;
3) Canada - 26.0;
4) France - 19.0;
5) Ukraine - 14.0;
6) Australia - 12.0;
7) GERMANY - 9.2;
8) Argentina - 9.0;
9) Kazakhstan - 5.0;
10) Poland - 4.0 million tons.