At the end of last month, at an international forum in Romania, local analyst Cesar Gheorghe made an interesting analysis of what is happening on the grain markets.
According to him, there is currently a big problem with the cash flow of companies and the large amount of goods in stock, and Russia is a major source of competition and can negatively affect European agriculture in international tenders.
"The Russian Federation is all in, it has nothing to lose. It has the cheapest fuel, it has the cheapest fertilizers, everything is centralized, if tomorrow he says he will sell wheat below $100 a ton, I firmly believe he can do it. At any risk!”
This analysis, as well as the words of Russian Deputy Foreign Minister Sergey Vershinin to UN representatives, regarding the Black Sea Corridor, that "the resumption of the work of the pipeline is an integral part of the grain deal" made us take a look deeper into the official data and actions of Moscow.
Statistics show that Russia's wheat production has increased by more than 60% in the past decade, making it the world's largest exporter. It is expected to account for more than 20% of global wheat trade in the current 2022/23 season, thanks to competitive prices and abundant supplies.
The US Department of Agriculture (USDA) in its forecasts set Russian wheat exports at a record 45 million tons in the 2022/23 season, which is 36% more than the previous year and 3.5 million tons above the previous record of the 2017/ 18.
Even with exports running at a record pace after last summer's bountiful harvest, Russia's wheat stocks at the end of the 2022/23 season on June 30 remained the highest in nearly 30 years, according to USDA data.
Wheat exports in the 2021/22 season, which included the first months of the war, fell to a five-year low of 33 million tonnes as banks and insurers refused to deal with Russian exporters.
However, in July and November '22, the United States and Great Britain issued licenses allowing transactions involving Russian agricultural goods, including the provision of insurance and other services. The US has also clarified that agricultural goods are not subject to its sanctions, increasing its willingness to work with Russian grain.
The question is why right now Russia decided to harden the tone towards the UN on the Black Sea deal? Undoubtedly, the removal of obstacles to the export of Russian grain and fertilizers, such as the reconnection of the Russian Agricultural Bank (Rosselkhozbank) to the SWIFT global payment system, would greatly benefit the country.
On the other hand, if the demands are not respected, the Kremlin relies on a backup plan. Many countries in Africa, the Middle East and Asia rely on Russia for grain supplies.
On Friday, Russia's agriculture minister told reporters: “Supplies to friendly nations have increased and now amount to 87% of total agricultural exports. Export flows to China, Turkey, Egypt, Bangladesh, Algeria and Pakistan have increased significantly."
"Russia is systematically redirecting its export flows to prioritize working with new and responsible foreign partners. Today, every fifth shipment of wheat exported worldwide is grown in Russia," noted Patrushev.
All these statements show that Russia does not feel particularly worried about its export activity, while at the same time it has significant quantities of grain that can set the pace on international markets for a long time to come.
And while the economic interests of the US, Turkey and other countries coincide with those of Russia, Europe remains increasingly alone in the "grain war". Moreover, the topic managed to drive a wedge into "European unity" as well, obliging some countries to pay the price of solidarity, at the expense of others who proclaim it.
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