On February 15, 2021, a new system of regulation of the grain crops market came into force in the form of export quotas and duties. In anticipation of the entry into force of new measures to regulate the export of grain, the Soyuzkrakhmal Association organized a round table. The Association has attracted leading experts, representatives of government authorities and the business community. During the discussion, the scenarios of the grain market functioning in the new season were discussed. And also the consequences of the action of the grain damper mechanism for the deep grain processing industry.
Ministry of Agriculture Russia has prepared a long-term program of regulated floating duty on grain. It is designed to protect the domestic market from the growth in the cost of grain raw materials on world markets. Regulators suggest that this measure will help contain the rise in prices for basic food products for the population. Which, according to the official results of 2020, amounted to 7,9%. According to various estimates of professional market participants, this figure is significantly higher. It should be noted that the price parameters of the grain market concern every inhabitant of our country. Both the prices for bread and basic products of the consumer basket and for confectionery, meat and dairy products depend on them.
On February 10, 2021, the Association of Advanced Grain Processing Enterprises organized a round table.
"On the situation on the grain market: possible development options." The discussion was attended by the heads of enterprises that are members of the Association. As well as representatives of analytical centers: Rudolf Bulavin, head of the Sectoral Analysis Department of the Federal State Budgetary Institution Agroanalytics Center. And Dmitry Rylko, General Director of the Institute for Agricultural Market Studies.
Grain prices
The industry is currently concerned about the fact that grain prices continue to rise. According to the analytical center "SovEkon", for the annual period from September 2019 to the present day there has been a price increase of over 50%.
The average price per ton of corn grain increased from 9 rubles. up to 900 15 rubles. For a ton of wheat grain of the 500rd class - 3 15 rubles. 400 and 4 classes - 5 15 and 350 14 rubles. respectively. And in a number of regions of the Southern Federal District, the current price for corn is 550-15 per ton.
As a result of the increase in the cost of grain, enterprises in the industry are forced to raise prices for their products. This is due to the fact that about 75% of the total price for products of deep processing of grain is the cost of raw materials. At the moment, the cost of manufactured products of enterprises that are members of the Association has grown by 15%. This, in turn, causes an increase in the prices of food and feed products and accelerates food inflation. This event has a negative impact on the value of the consumer basket of Russians. It includes a grocery basket, a set of non-food items and services. All of the above aggravates the situation of the unprotected segments of the population.
At the same time, the high cost of grain significantly reduces the profitability of the industry. In fact, it nullifies the effect of government support measures in the form of concessional investment loans. Also, enterprises have problems with the return of investments, the implementation of credit covenants. This leads to a drop in the ratings of borrowers, a decrease in investment attractiveness. It negatively affects the implementation of the Strategy for the Development of the Food and Processing Industry. And also on the development of export-oriented investment projects.
Distribution of the produced grain between sectors
Focusing on this problem, I would like to clarify that the products obtained as a result of deep processing of grain. For the most part, it is aimed at import substitution and export.
It is widely used in:
- confectionery,
- bakery,
- food concentrate,
- meat and dairy,
- brewing,
- textile, paper, metallurgy, oil and other industries.
IKAR Director General Dmitry Rylko predicts that after the commencement of the duties on June 2, 2021, the situation will develop as follows: “The immediate reaction will be a small switch to oilseeds. Already this season, following the results of spring sowing, we expect a slight decrease in the area under grain crops. We see a shift in the interest of farmers to oilseeds, because there are no such regulatory measures in this area. And the margin is expected to be high. The introduction of the export duty will have almost no effect on the current season, however, it may have a very significant impact on the next season. In general, I assess the impact of the grain damper mechanism on the grain industry as extremely negative. ”
Rudolf Bulavin, a representative of the Agroanalytics Center, expressed the following opinion regarding the export duty: “Since the mechanism is new for the Russian market, I do not exclude that adjustments will be made in the testing process in April-May. As for the functioning of the duty, I believe that weekly fluctuations can be quite significant. Since the duty will be calculated on a weekly basis. In this case, the next step will be the introduction of grain futures, so that grain exporters can insure their risks against changes in the duty. In general, it can be assumed that the market's reaction to the introduction of the duty will be the separation of the domestic and foreign markets ”.
Results
President of the Association "Soyuz starch"Comments on the end of the round table:" The Association is interested in expanding the circle of participants in the discussion and broad coverage of this issue. The development of deep processing of grain is necessary for Russia. First, the domestic market lacks the production of some highly processed products, a number of amino acids, organic acids, and vitamins. In these categories, we are completely dependent on imports. Secondly, our country has a good export potential, because we have been collecting record grain harvests in recent years. It is much more profitable to export products of deep processing in comparison with the initial raw materials, because our products are high-margin. We hope that with the improvement of legislative measures, the position of the Association will be positively perceived by the regulatory state bodies ”.
About Association "Soyuzkrakhmal": The Association of Advanced Grain Processing Enterprises is a professional non-profit organization promoting the strengthening and development of the domestic market for deep processing of grain. The Soyuzkrakhmal Association was founded in 1998 and currently unites the largest enterprises in the industry.
They provide:
- about 80% native starch;
- more than 70% glucose and glucose-fructose syrups;
- 65% modified starches and maltodextrin;
- 100% - L-lysine sulfate of domestic production.