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Exporting Low Expectations
The anticipation of negative changes may be worse than their consequences. This is what Russian agricultural market participants see as they are absorbed in discussions about the possible tightening of conditions for grain deliveries abroad. The Reuters and Platts agencies reported yesterday, citing sources, that the Russian Ministry of Agriculture plans to hold a meeting with exporters on Friday. After discussions in a professional dialogue, market participants do not rule out the possibility of discussing restrictions on grain exports.
The incident could not be immediately confirmed. The Ministry of Agriculture and Forestry did not respond. However, the fact that the meeting was held cannot be considered unexpected. The last two weeks have been devoted to discussing the issue of the Russian harvest on the market. For example, the Minister of Agriculture Oksana Lut announced plans to revise harvest forecasts due to weather conditions in Siberia and problems in border areas.
Weather disasters have been haunting Russian farmers since spring. May frosts coincided with drought in the south and were followed by rains in the Urals and Siberia. Winter crop sowing in the Black Earth Region is going according to plan, but discussions in the professional community do not inspire optimism. Planted in dry soil due to lack of rain, they germinate reluctantly. This will likely lead to lower yield forecasts.
The authorities' hopes that the market itself will regulate the dynamics of foreign deliveries seem to be melting away. According to Rusagrotrans, wheat exports in September reached 5.26 million tons. Officially, this figure has decreased, but only by 4% compared to last year. Despite the moratorium on closing markets in Turkey, one of the main destinations for Russian wheat exports, the dynamics remain calm. This can probably be explained by the formation of grain reserves in Turkish customs warehouses and the development of new destinations for exporters.
Not everyone understands the essence of this activity. In early October, the Grain Exporters Association reported on its Telegram channel that it plans to contact the Ministry of Agriculture and propose a revision of the quota distribution procedure. Among the possible options, as reported by Interfax, is the rejection of the historical principle according to which export opportunities are determined by the volumes of the previous season. They described their position within the union as a desire to protect the market from those who export "empty" products. The organization did not offer fair prices for products presented abroad.
The new approach to quotas will most likely primarily imply a reduction in the number of exporters, which in the current conditions may seem attractive not only to large traders, but also to the regulators themselves. After all, it is always easier to control a small group of players.