The fact that the Ministry of Agriculture of the Russian Federation is considering the possibility of additional purchases of grain in 2023 for the intervention fund became known from a letter from Deputy Minister Oksana Lut to President of the Chamber of Commerce and Industry of the Russian Federation (CCI RF) Sergey Katyrin. Vedomosti has a copy of the letter.
The publication reports that earlier, O. Lut, at a meeting with the People’s Farmer Association, stated that the ministry does not plan interventions in 2023. The deputy minister then explained the lack of plans by the fact that the volume purchased in 2022 is sufficient to meet the three-month need for food grains.
In 2022, 3.08 million tons of grain were purchased for the intervention fund, Lut writes in a letter to Katyrin. The data of the National Commodity Exchange dated December 30, 2022 indicate the purchase of 3.1 million tons for 47 billion rubles. As for the contracts, there were refusals, Oksana Lut said at a meeting with the People’s Farmer. The volume of intervention purchases is determined based on the domestic consumption of wheat in the first quarter of 2022, the deputy minister said in a letter.
The procurement and intervention mechanism itself has been operating since 2001. When the price of grain on the market drops, the state buys it into the fund, thereby removing the surplus from the market and keeping it from falling too much. With a sharp increase in the cost of grain for processors, a decision is made on commodity interventions, and due to saturation, the price stabilizes. For the Ministry of Agriculture, this is primarily a mechanism for regulating the cost of consumer goods, says Alexander Korbut, vice president of the Russian Grain Union.
A. Korbut points out that in the letter, to which Lut answers, the Chamber of Commerce and Industry of the Russian Federation proposed to additionally purchase 10-15 million tons of wheat and rye for the intervention fund. But even for the purchase of 3 million tons, the state spent 47 billion rubles, and their storage will cost about another 6 billion rubles. a year, he says. If we now increase grain purchases for the fund, then we need to make it a mechanism for regulating the market – to buy not only food grains, but also feed grains, as well as corn and sunflower, the expert believes.
According to Korbut, in this case, it is necessary to remove 15-17 million tons from the market in order to effectively regulate and increase prices for farmers. But there is nowhere to store such a volume of grain, he believes, so in order to exclude additional volumes of grain from the market, it would be more correct to cancel export duties and make the export of surpluses free. From March 3, 2023, according to the Ministry of Agriculture, the export duty rate for wheat is 5371.6 rubles. per ton.
It is advisable to use budgetary funds for grain interventions in the second half of the year, which will be the first half of the 2023-2024 agricultural season, said Eduard Zernin, president of the Union of Grain Exporters. In his opinion, in the current agricultural season, additional purchases are unlikely to change the price dynamics.
Excess supply, Zernin believes, is more effective to remove through exports, including through the redistribution of export quotas in favor of more active exporters. The ministry is ready to consider this possibility based on the analysis of export data for February-April 2023, the press service of the Ministry of Agriculture reported on March 1.
