RESULTS

I international “Grain Forum 2023. Dubai” conference, dedicated to Russian grain trade actual issues, finished its work on February 21, 2023 in Dubai (UAE). Heads of Ministry of Agriculture of Russian Federation, Agroexport Company, International grain council and largest Russian and Kazakh exporters, leading international traders took part in Forum supported by Russian Union of Grain Exporters.

“Grain Forum 2023. Dubai” gathered more than 460 delegates from Russia, Belarus, Kazakhstan, Azerbaijan, Estonia, Latvia, Germany, UK, Italy, Switzerland, Poland, Cyprus, UAE, Turkey, India, Iraq, Iran, Sudan, Egypt, Jordan, Singapore and Saudi Arabia. Thereby Dubai forum became new, important and independent site – venue for Russian exporters of grain crops with buyers from North Africa and Middle East.

Dubai has been chosen as a conference venue not accidentally. UAE is becoming new center of grain trade especially important for Russian export. By the way, MENA region is one of the greatest market of grain crops sales where more than 50% of world barley import, more than 25% of wheat and a quarter of total volume of corn import. MENA countries are one of the main sales market for Black Sea grain.

Among main Forum topics – problems and possibilities of Russian grains, oils and niche crops export, admission to foreign markets, payments in rubles, export supplies logistics and chartering and insurance problems.

Opening the Forum, deputy Minister of Agriculture of Russian Federation Sergey Levin, noted that for last ten years volume of Russian wheat supplies significantly grown and almost half of this export falls on Middle East countries and third falls on Africa. Deputy Minister stated, “We are recording a growing demand for basic products and, first of all, for grains. Russia is ready to supply foreign partners from friendly countries with quality products. Being a wheat export supplies world leader we confirm our commitment to humanitarian principles of world grain market.”

International grain council (IGC) executive director Arnaud Petit made a report about current situation on grain crops world market and Russia’s place in it. He pointed out, “Black Sea region vitally important for global grain trade”. According to his speech in coming months global wheat market will rely on three regions – Russia, EU and Australia. At the same time, importers now buy mainly feed wheat in Australia.

As Arnaud Petit noted, world wheat harvest in 2022/23 season became record, being increased for fourth year in a row, as well as record total production was recorded in the eight largest exporting countries. At the same time, growth of world wheat consumption, limited by historically high price, will be one of the slowest for more than two decades. Consumption decrease in South Asia is slightly offset by growth in other places, primarily in Middle Asia.

Union of Grain Exporters Chairman of Board Eduard Zernin in his speech reminded about record harvest of wheat in Russia, which exceeded more than 150 million tons. Today every fifth ton of wheat on world market supplied by Russian companies. In countries such as Algeria and Saudi Arabia in current season, it managed to multiply the supply volumes. Eduard Zernin stated, “We began to devote more time for direct contacts, find individual solutions. It is important and beneficial for both sides factor, which leads to trade volume growth. I sincerely hope that we will use our further development on market, taking into account existing potential, for benefit of these countries.”

“For some reasons current record harvest became a surprise for some international experts. However, we know these prerequisites and they are quite simple: fertilizers export restrictions in this season, more fertilizers entered the domestic market. Dynamics of fertilizers consumption directly correlated with the harvest volume. And the fact that more of these substances were left inside the country leaded to harvest growth.”

According to his speech, while Russian Federation does not bring fertilizers to the fields in accordance with a scientifically based norm yet. Head of Union stated, “Actually, we can calculate our potential just on today's squares. If we take into account that we return agricultural land to circulation every year, then the potential is 2.5-3 times higher. This is a very serious factor and we need to keep it in mind when we talk about food security in the world ensuring. We will work on this issue, and the Ministry of Agriculture of the Russian Federation actively supports this process, so, of course, we have a very serious competitiveness reserve.”

In addition, Eduard Zernin drew attention to the fact that in the coming years it will be necessary to more closely monitor climate changes that are taking place in a number of countries, primarily in Central Asia and lead to a decrease in yields. "Farming conditions here will seriously deteriorate. The problem is in the glaciers melting, respectively, in water supply volume reducing and in soil dehydration. It is also a big responsibility for us because, in fact, except from us, these states will have nowhere else to get basic agricultural products, primarily grain."

That is why it is necessary to work out logistics corridors right now, to think about the grain and flour flow increase from Russian Federation to these countries. "This will probably be the next challenge that we will feel in three or four years. And even those Central Asian countries that are now making certain plans for the development of agriculture for themselves, of course, should very seriously consider the factor of reducing the volume of resource provision," he said.

Another important topic being raised at the conference is the hidden sanctions imposed by western countries against Russian grain exporters. Although most of the problems have been overcome in many ways recently, a number of issues are not solved. "We still see an ongoing problem with bank payments. Yes, it is very important that now everything has significantly eased, nevertheless, the banking problem has not been completely solved," Eduard Zernin said. According to his words, "there is serious pressure on our customers from some banks that close credit lines to them for the purchase of specifically Russian grain."

In addition, there is still a shortage of ships. These are the problems of marine insurance and the withdrawal of a significant number of the fleet owned by Ukrainian ship owners from servicing Russian exports. "However, recently the shortage of the fleet has turned into a premium to freight, that is, there are ships, but they are more expensive," Eduard Zernin said. It is shown, in particular, by the analysis of the competitive environment in the Black Sea. "We see a difference in freight from some ports, for example Bulgaria and our deep-water ports, despite the fact that operationally we have exactly the same conditions," he said.

Therefore, Russia is now primarily faced with the task of building large-tonnage vessels for long-distance deliveries. To date, the demand of Russian exporters is 61 grain carriers, 27 of which with a capacity of 40 thousand tons and 34 with a capacity of 60 thousand tons. In this regard, the Ministry of Agriculture of Russian Federation initiated the process of design documentation developing for such vessels. Rosagroleasing Company will announce the corresponding order in the near future by agreement with the agency. In future, according to prepared projects, construction will be carried out at Russian shipyards. The issue of buying a fleet on the secondary market is also being worked out.

It is not a surprise that overt and covert sanctions had a direct impact on the market: grain prices on the world market rose one and a half times. These prices have affected not only Russian grain buyers, but also buyers all over the world, because these prices are a benchmark. "The situation began to change only in the last quarter of last year, when we sharply increased the volume of exports, because we practically solved all the main problems," Eduard Zernin said.

However, as the head of the Union stated, market volatility is beneficial only to profiteers, for them it is a "fate gift". "We are not profiteers, we grow grain. It is much more interesting for us to assess the probability of future consumption, that is, how much we can sell, including to foreign markets. Moreover, if such risks, which we experienced in the middle of last year, still face us, if their probability is high enough, then, of course, this will lead to a decrease in investment activity. This decrease in investment activity will affect more than one season." At the same time, he urged to think about those who are forced "against their will to enter the world market" since in many countries there are certain weather conditions that limit the production of grain and other products, "there are certain population growth rates that cannot be closed with their capabilities."

As for specific figures, as Eduard Zernin said, Turkey and Egypt remain the main buyers of Russian wheat, "which change their position from season to season and, nevertheless, remain leaders." Thus, Turkey in the first half of the agricultural year (July-December 2022) purchased 4,237 million tons of Russian wheat against 4,27 a year earlier, Egypt - 3,777 million tons against 3,191 million tons. At the same time, last year's leader Iran "seriously deflated." Its purchases amounted to 1,766 million tons against 5,092 million tons a year ago. "There are certain prerequisites for this. Nevertheless, I think that both sides will learn lessons from previous relations, and, accordingly, Iran's share will increase," he said.

The head of the Union particularly focused on wheat trade with Saudi Arabia and Algeria. "I call these countries the two stars of the season. We began to devote more time to direct contracts, began to find individual solutions, and this leads to an increase in trade volume. It is very important and mutually beneficial factor. I hope that our further development in the market, taking into account the existing potential for increasing yields, will be used for the benefit of these countries," he said. In July-December 2022, Saudi Arabia imported 1.442 million tons of Russian wheat against 662 thousand tons a year earlier, Algeria - 1,065 million tons against 301 thousand tons.

Igor Pavensky, head of the analytical center of Rusagrotrans Company, focused on export statistics more detailed. According to his words, in July-January of the 2022/23 season, Russia took key positions in grain supplies in a number of countries, such as Egypt, where the share of Russian wheat increased from 45% in the 2021/22 season to almost 70%, Pakistan - from 10% to 70%, Sudan - from 30% to 85%, Libya - from 47% to 86%. Oman started buying wheat this season and Russia's share in the country's imports immediately soared to 77%. Turkey imported about 72% of imports from Russia. Saudi Arabia increased its share in purchases to 64%. Algeria, after the start of deliveries from Russia last season, reached a level of 30% in the country's imports as a whole. Bangladesh brought the share of purchases to 42% against 8% last season. In general, the share of Russian wheat in the market of Middle Eastern countries increased to 56% from 46% a year ago, in North Africa - to 51% from 26%. Positions in South Asia are also recovering - 26% against 5%. At the same time, the share of Russian wheat in the EU markets has halved to 6%.

As for the forecasts of the harvest in Russia for the next season, it has been revised downward. "We have revised our forecast of the grain harvest in 2023 downward. The current forecast is 125.4 million tons of grain, of which 79.7 million tons of wheat." Reasons for the decline are the lack of winter crops in the central regions, as well as the ice crust formed in the fields due to temperature fluctuations and lack of snow cover in a number of regions. In general, the loss of crops may amount to more than 8% against the minimum loss last year - less than 3%.

Nevertheless, taking into account the record rolling stocks of wheat - about 15 million tons (excluding 3 million tons purchased in the intervention fund) - the export potential in the new agricultural year (July 2023-June 2024) will remain at a high level - about 37.5 million tons against the forecast of 46 million tons in the current agricultural year, which will allow Russia to maintain its leadership in the world market. The wheat export potential of Russia's closest competitors in the world market is lower. In EU, it is estimated at 31 million tons (30.7 million tons last agricultural year), in Australia - 28.5 million tons (26 million tons).

According to the center, the remainder that will be exported by the main wheat suppliers in the world in the second half of the season (January-June 2023) is about 74.5 million tons, which is 10.5 million tons more than last season. More than 61% of the total volume (more than 45.6 million tons) is accounted for Russia (16 million tons), Australia (17.5 million tons) and Canada (12.1 million tons).

The afternoon session of the conference was entirely devoted to the trade of food grains, such as chickpeas and peas. Therefore, peas have a good chance to become a culture of mass Russian agricultural exports. The growing global demand for pea protein and a serious expansion of its processing capacity can make it the flagship of Russian agricultural exports. Rosselkhoznadzor has done its job perfectly, now it is up to Russian farmers to decide whether they can quickly change the crop rotation and increase the production of peas, turning it from a niche product into a mass one. Statistics show that in the 2021/22 season, Russia exported 1.4 million tons of peas, which is 62% more than in the previous agricultural year. This is a record figure. In 2020/21, agricultural year exports amounted to 863 thousand tons, a year earlier - 588 thousand tons. In the top 10 exported agricultural crops peas rose from seventh to fifth place. The share in exports also became a record - 2.8% against 1.5% in the 2020/21 agricultural year.

Difficulties in logistics and shipping, problems in the financial, insurance, and legal spheres were the topic of discussion at the final, 4th session of the Forum. You can learn more about the conference program by contacting the Conference Organizing Committee.