The gigantic export of cheap grain from Russia has a major impact on the grain market. The country breaks record after record, but how did Russia become an agro-giant?
Russian grain exports reached a volume of no less than 43,3 million tons at the end of April. That is more than 40% more than was exported in April 2017. Wheat exports increased by 43%, and barley exports also doubled.
The director of the Institute of Agricultural Markets (IKAR) in Russia recently said that wheat exports could rise to 40 million tons this year. It would be a significant improvement compared to the current record. A record amount of 2017 million tons was already exported from July 2018 to March 30.
Record export
Total Russian grain exports would pass 50 million tons, the IKAR director said. However, it remains to be seen whether these records will actually be achieved. There is currently a drought in the Russian production areas, which is causing disappointing yields. Recent reports show that the harvest is in the extreme south of Russia (which has just started) is only half as big. Nevertheless, expectations for exports remain high, partly due to the accumulated stocks.
The French analyst firm AgriMer reports that the current grain campaign can be described as a Russian campaign. Russia usually takes care of the first half of the campaign, analysts report, and the second part is taken over by other grain suppliers. However, this year Russia continued to supply cheap grain.
Large market share
In 2016, Russia exceeded wheat exports from the United States (US) for the first time in 10 years. And in 2017, the European Union (EU) was trumped. According to the United States Department of Agriculture (USDA), Russia today controls 22% of the world wheat market. This while the EU controls 14% and the US 13% of the world market.
France is hampered by the heavy Russian grain exports. This is because wheat from Russia is cheaper. However, this situation only becomes truly clear when Mexico becomes involved. This country has traditionally been a major buyer of wheat from the US. However, this year Mexico was also supplied by Russia. It makes the Russian wheat price (in combination with the transport costs from the country) very competitive for wheat from the US, given that country is just around the corner.
Sanctions from the West
According to analysts, the reason why Russia is growing so strongly is the sanctions that the EU and the US have imposed on the country. This made the country more dependent on its own production. The Russian government responded strongly to the peasants to support financially, to ensure that farmers could invest. According to figures from the British Financial Times, Russia imported more than 2013% of its food in 35. That percentage would now be around 20%.
In addition, growth is also supported by the cheap land in Russia. The country is doing everything it can to put unused agricultural land back into use as quickly as possible. It also means that there are hardly any rules, which is unthinkable in Europe.
China as a new customer?
Russia sees a new opportunity in China. Especially in view of the trade war between the US and China. The Russian phytosanitary service is currently investigating the problems with access to the Chinese market. In the short term, Russia hopes to become an important grain supplier to China.