Russian grain export curbs 'could become the norm'

Russia's plans to restrict grain exports in the second half of the 2020-21 marketing year could become normal practice, according to the Russian Grain Union (RGU).

Russia, the world's largest wheat exporter, said earlier this month that it would impose a 15mn t quota on grain exports from mid-February to the end of June 2021, despite expectations that this year's crop will be the second largest on record.

The 2020-21 crop, estimated at 130mn-133mn t, will allow Russia to comfortably ensure domestic supplies, but also accumulate large stocks, meaning there is no need for grain export restrictions this season, RGU vice president Alexander Korbut told Argus.

The government appears keen to extend the export quota system it introduced last year.

"The main goal of export restrictions is to conserve domestic resources. But also, there is a strong feeling that the government wants to [put] the export restrictions mechanism... on a permanent basis," Korbut said.

Russia imposed a 7mn t grain export quota in April-June 2020 to ensure food supply following the outbreak of Covid-19.

Grain export market consolidation

Restrictions could benefit Russia's larger exporters and squeeze out smaller firms.

Korbut said that for a second consecutive season the RGU had noted a reduction in the number of Russian wheat exporters. "It is too early to talk about monopolisation, but the export market is being concentrated [through] the use of administrative methods," he said.

This reduction risks damaging Russia's image as the world's largest wheat exporter, even though this season is atypical, with many countries trying to build stocks against the backdrop of the pandemic.

Bangladesh, the third-largest importer of Russian wheat, said last year that it would switch to other origins if Russia introduces export curbs, and did not buy any Russian wheat during the previous quota period.

But Russian wheat should continue to appeal globally, according to Korbut: "Russian exporters are doing a good job, sustaining a positive image, despite the policy pursued by the government."

Sunflower seed export tax hike

Russia also plans to restrict sunflower seed exports, which it banned from 12 April to 30 June this year. It is expected to increase the export duty to 30pc from 6.5pc on 1 January.

The RGU says this move — driven by Russian crushers — is economically impractical because it could lead to weaker domestic competition. Farmers will have no choice over to whom they sell and crushers are likely to dictate prices.

Russian sunflower seed exports could be limited to just 900,000t during this marketing season, according to the association — just 7pc of this season's expected production of 13mn t.

"The purpose of these restrictions is to monopolise the sunflower seed market, but this could backfire. The sunflower seed export ban imposed in spring caused a jump in sunflower oil prices and resulted in a crushers' race for feedstocks, which ramped up local sunseed prices," Korbut said.

Russia exports about 60pc of its sunflower oil output, and is the world's second-largest exporter, so rising export prices could inflate domestic sunflower seed prices, which have already hit Rbs40,0000/t ($526/t) ex-works in many regions, despite the announcement of the export duty hike.

Another long-term consequence of export restrictions could be a lower sunflower seed planted area, which is already down by 120,000 hectares this season, according to the RGU.

"The planted area will not be sharply reduced, because sunseeds are an insurance crop, often used to reseed winter crop losses, but today Russian farmers have a choice of what crop to plant," Korbut said. He added that there are more marginal crops than sunflower, such as soybeans, rapeseed or sugar beet.

Korbut also highlighted the fact that export restrictions can create excessive domestic supply, which can depress prices in the long term, hitting agricultural producers hardest.

By Victoria Blazhko