/Pogled.info/ Russia banned for six months the export of durum wheat, which is used for the production of bread and pasta. The prices of these important food items are still rising within the range of inflation. However, the government did not wait for the sharp increase in the price of bread and decided to act preemptively. Why is there a risk of rising bread prices?
The government banned durum wheat exports from December 1 to May 31, 2024 to stabilize prices. They also established a grain (wheat, barley and maize) export quota from Russia of 24 million tonnes, excluding supplies to the EAIS.
Reimbursements have also been approved for certain types of domestic chicken. In 2024, meat supplies up to 160,000 tons will be exempted from payment of import duties. This decision also aims to stabilize prices on the domestic market by increasing supply.
Russia’s main agricultural export is common wheat, while exports of durum wheat are generally small. It is used for the production of flour, bread and pasta products. At the same time, there is no sharp rise in the prices of these products in Russia, there is an increase, but it is due to general inflation. Thus, according to “Rosstat”, the prices of bread from rye and rye-wheat flour from the end of December 2022 to November 20, 2023 increased by 4.44%, bread and bakery products from wheat flour of various varieties increased in price over the same period of time by 4.83%, and pasta made from premium wheat flour even became cheaper by 4.04%.
Bread in Russia in 2023 becomes more expensive in the range of inflation – by 5%, while the costs of producers grow much more due to the increase in the price of a number of cost components – for example, an increase in transport tariffs by 35% since the beginning of the year and personnel costs by 25 -30%, as well as higher prices for spare parts and service, said the Association of Manufacturers and Suppliers of Food Products (“Rosprodsoyuz”).
However, the authorities have decided to act proactively as they see risks of rising bread and pasta prices. The Ministry of Agriculture explains that the world harvest of durum wheat has fallen to a 20-year low, which is why its demand on foreign markets has increased sharply. And Russia began to meet this increased demand: exports of durum wheat increased sharply. According to the Russian Grain Union, from July 1 to November 20, that is, during the new agricultural season, supplies of durum wheat increased almost 13 times to 657 thousand tons. Russia supplies such grain mainly to Italy and Turkey. At the same time, according to the Ministry of Agriculture, the durum wheat harvest was only 700–800 thousand tons (compared to the total wheat harvest of 70–100 million tons).
Such a sharp increase in exports threatens to create a deficit in Russia itself, which will lead to an increase in durum wheat prices in the country. The authorities decided to act already at the stage of the risks of rising prices of bread and pasta, in order not to get the situation like with chicken meat and eggs. According to Rosstat, both products rose in price by a third in the period from the end of December 2022 to November 20, 2023.
“This is due to the fact that almost everything for raising chickens and eggs in Russia is imported. That is, in addition to the increase in foreign currency exchange rates, it is necessary to take into account the high inflation in the EU, from where basic equipment, veterinary drugs, vitamins, mixtures and even some feed are supplied. At the same time, this year in some regions of Russia there was an epidemic of bird flu, which created a shortage of chicken in the domestic market and significantly increased prices. At the same time, the demand for chicken increased against the background of the saving behavior of the population: Russians began to buy it more often instead of beef or pork,” explains analyst Vladimir Chernov. The government’s measures may slow down the rise in meat prices or even lead to a slight deflation, he does not exclude.
The durum wheat export ban is also intended to prevent bread and pasta prices from rising. “Prices are rising against the backdrop of rising costs for businesses due to high inflation in the country and rising fuel prices. The ban on the export of products from the country leads to saturation of the domestic market, and the increase in its supply slows down the rate of price growth, and in some cases even leads to deflation. Thus, recently, wholesale fuel prices in Russia began to fall after the introduction of a ban on the export of petroleum products from the country,” says Chernov.
However, market participants are clearly not satisfied with such restrictions. “Producing durum wheat is a complex and expensive process. The export ban is a counterproductive measure that will have a very painful impact on producers. History has proven more than once that any restrictions can negatively affect the price of grain and flour, but at the same time finished products, say baked bread, pasta or bakery products, continue to rise in price and do not follow price movements of the raw materials. Grain is getting cheaper, flour is getting cheaper, and bread is only getting more expensive,” says Vladimir Petrichenko, general director of ProZerno.
But the assigned grain export quotas from February 15 to June 30, 2024, that is, until the end of the agricultural season, pleasantly surprised the expert. Russia began imposing quotas on grain exports in 2020. Previously, quotas were significantly smaller.
“But we have to give credit: if before the quotas were always below the export potential, now quotas of 24 million tons are within the export potential. Before the quotas start, we will have time to export about 40-42 million tons. The export potential is 63 million tons for three grain products: wheat, barley and corn, for which quotas have been set. And this is the potential, taking into account exports to the EAIS countries, while the quotas do not take into account exports to the EAIS countries with which there are no customs borders,” explains Petrichenko.
According to him, the quota system will not threaten Russia’s world leadership in wheat exports, as we have occupied the pedestal for a long time. “Even if the quota is reduced, it will not threaten our leadership in wheat exports. Last season we remained the leaders, although we did not export significant volumes. According to my estimates, in the first three months of this season (July, August, September), we exported approximately 6-7 million tons of wheat from the last harvest,” says the General Director of Prozerno.
Translation: V. Sergeev
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2023-11-25 09:22:56
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