Grain prices in the near future may rise up to 2 times, experts say. Manufacturers have no other choice: everything is more expensive to produce, and profitable exports are impossible due to duties.
According to Inna Rykova, head of the Center for Sectoral Economics of the Research Institute of the Ministry of Finance of Russia, there are a lot of factors that together will push grain prices up.
— Lower prices on the domestic market, largely due to the «pressure» of the record harvest last season.
— The lack of sufficient storage facilities that would allow producers to keep their crops for a long time in anticipation of rising prices.
— Huge export duties that prevent high profits, even if world market prices are high.
As a result, most grains and legumes, with the exception of rice, fell in price by 20-40% during 2022.
However, all this place can push farmers to the only solution: to reduce production.
After all, it is impossible to sell your products abroad at a high price, and it will not be possible to sell them on the domestic market in any case due to a lack of demand.
But that’s not all. The most difficult problem is the increase in the cost of production.
Why is the cost rising?
There are also a number of factors involved here.
— Rising prices for mineral fertilizers and plant protection products.
— Rising prices for agricultural machinery and spare parts for it, which are largely of foreign origin.
— Increased logistics costs due to sanctions. In particular, we are talking about the rise in the cost of insurance and freight of ships carrying Russian grain.
In addition, sanctions also cause other difficulties with exports: in particular, it is necessary to reorient deliveries, as well as solve problems with making payments.
Won’t rising prices help farmers?
Recently, the world market has shown a trend towards a rise in grain prices. This is reflected in the prices of Russian wheat.
For example, now a ton of wheat in the port of Novorossiysk is trading at a price of about 15,000 rubles, while in August it cost about 13,000.
But this does not mean that farmers, many of whom are in a difficult financial and economic situation, can be happy. The export duty «safely blocks» any possibility of obtaining high profits, since the higher the world prices, the higher the duty.
Therefore, manufacturers have a certain pessimism about the future prospects of the industry.
If the government does not take some measures that will allow them to make their production profitable, then in the near future a strong increase in selling prices and a decrease in production are almost inevitable.
