Russia may Place Embargo on Grain Exports

Russia may Place Embargo on Grain Exports


The Ministry of Agriculture and the Ministry of Trade have drafted the bill, providing for a temporary ban on the export of major grain crops from Russia, from March 15 to June 30 this year.

Both agencies underlined that the decision was aimed “exclusively at protecting” the domestic food market. Earlier, it was reported that the Ministry of Economic Development will also introduce a temporary ban on export of grain, as well as cane and white sugar to the EEU countries. The rules to be introduced will affect exports of wheat, rye, barley and corn from Russia, and for now they will be in effect until August 31. The Ministry of Industry and Trade has also introduced exceptions to these rules concerning shipments with export licenses.

As noted in the Russian expert community, after these decisions are put into action, food prices may increase by 8-22% all over the world. The fact is that the conflict in Ukraine will inevitably affect food prices, because Russia and Ukraine are major producers of agricultural products and account for more than a third of grain exports. Both countries have been also the leaders in supplies of sunflower and rapeseed oil. It is worth mentioning that Russia is also currently the leader on the world market of mineral fertilizers, the export of which will have to be limited due to the sanctions to avoid their deficit and guarantee a good harvest.

In addition, Russia and Ukraine are now among the world's top three exporters of wheat, rapeseed, corn and vegetable oil. Egypt, China, Turkey and the European Union that were the main buyers of these products are now looking for alternative contracts, which has already led to a spike in prices.

According to the forecast of the UN Food and Agriculture Organization, the conflict in Ukraine will unfortunately increase the number of countries where people go hungry, since Russia and Ukraine together provide about a quarter of the world's grain supply, and at least 20% of this market is falling out due to the military actions. The spring sowing begins in March, but Ukraine will most likely not be able to sow.

The chances are Russia will also have problems with the supply of imported seeds for sowing, as well as spare parts for agricultural equipment. This is also a serious risk for poor regions of consuming countries. In addition, it is necessary to establish other payment systems, because the leading Russian banks are disconnected from SWIFT, and such “adjustment” requires a lot of time.

In connection with the anti-Russian sanctions, the decision to impose a temporary ban on grain and sugar exports was approved by the Sub-Committee on Customs Tariff and Non-Tariff Regulation and Protective Measures in Foreign Trade of the Russian Federation at the meeting on March 10. So, the ban may be imposed as early as today.

Many countries have already faced a risk of reduction of areas under crops of cereals and field vegetables that will inevitably lead to an additional jump in prices connected with the commodity group of crops. In addition, the market of oilseeds will suffer, and supplies of Ukrainian sugar beet will simply withdraw from the turnover, resulting in a sharp decline of sugar production in the world.

“Those industries that are involved in agriculture in our country are already almost ready for the spring field work,” Vasily Uzun, chief researcher at the Center for Agro-Food Policy at the Russian Academy of Agricultural Sciences, told “As for the forthcoming weather conditions as well as crop forecasts, they are quite acceptable, at least with regard to winter wheat. So, there are no grounds for a drastic reduction.”

Uzun believes that the only concern is that it is necessary to finance at least “current expenses,” and there may be problems “in connection with the sanctions measures.” According to him, there is a need for such agreements that will not disrupt logistics chains.

According to experts, it is March that is the most important month, which affects the results of the produced agricultural products of the whole year. In general, harvest in Russia is expected to be “very good,” and there is no reason for us to drastically reduce production.

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