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Purchases to the state Fund in the season-2017/18 was not carried out, despite the fact that prices fell below the intervention
The Minister of agriculture of the Russian Federation Alexander Tkachev called the grain purchase interventions "somewhat harmful mechanism". In his opinion, much more effective this season, subsidizing transportation of grain for export from remote regions. Whether purchasing to the intervention Fund was useless and how else can you support the market, tell the author of this article, the President of the Board of Trustees of the National Union of grain producers Pavel Skurikhin.
At the beginning of March in the state intervention Fund was kept of 3.97 million tonnes of grain amounting to 36.4 billion. the Bulk of this volume was purchased in the years 2014-2016. In season 2017/18 procurement was not carried out, despite the fact that the domestic price level since the beginning of the agricultural year remains significantly lower than for the start of the intervention level. So, according to the National Union of grain producers (NHA), the average price of wheat of 3rd class in mid-March was equal to 8.8 thousand RUB/t (in the Asian part — 6,9 thousand rbl./t), 4th class— 7.5 thousand rubles/t (5.7 thousand RUB/t), 5th class — 6,8 thousand rubles/t (5,4 thousand rbl./t). Compared to the same period last year, agriculture in the European part of the country fell by about 12% and in the Asian part — 19-28%.
In current price terms the problem of grain interventions remains essential. It is virtually the only form of state support of the grain industry, directly affecting the receipt of revenues for locally grown products. And the price level of the purchases to the state intervention Fund (GIF), along with the export prices is one of the main parameters determining the conditions of the total grain market in the country.
If we consider the efficiency of grain interventions from the point of view of the expenditure of public money, it is undoubtedly the purchase cost the budget dearly. The grain in the GIF is bought on credit, over a long period is stored in the elevators, there are risks that make the implementation of the acquired in previous years of the reserves uneconomic. In this sense, of course, every year to find the money for these expenses difficult. In addition, according to the Ministry of agriculture, intervention purchases remove the responsibility from the regional authorities and farmers for planning and maintaining the balance of production and consumption of agricultural products.
This is partly true, but only partly. It all depends on the goals of the government and sectoral ministries in relation to the activities and development of agriculture in General and the basic industry of grain production in particular. The fact that the intervention was launched, and the great acted in the period when the on current progress of development of agriculture in the country could only dream of. The average level of the gross grain harvest did not exceed 80 million tons, that is, its production was close to the level of consumption. The export component in the consumable article of consumption was negligible and the main factor affecting the Russian grain market was domestic consumer demand. In those years, and has developed a way to regulate the market, which has two important components: grain purchase and commodity interventions.
Purchases are ineffective?
In subsequent years, against the background of the sanctions taken decisions the work of the state program of development of agriculture and introduction of modern technologies and, more importantly, the weather factor influenced the active development of grain production in Russia. And the possibility of almost stable receipt of currency proceeds directly into the industry defined its export-oriented focus. As a result, average gross yield increased to 100 million tons, and the export potential is at least one third of the harvested grain yield.
In such a situation, of course, the creation of shortages on the domestic grain market and the situation of high prices for consumers seems extremely unreasonable, so grain commodity interventions remain unclaimed. There is only the accumulation of grain in the GIF without its possible implementation, as observed during recent seasons in the Siberian silos. And this despite the fact that long-term storage of grain is an extremely unfavorable event.
Owing to the transport of isolation that is the Siberian and Ural regions are most needed in carrying out grain interventions. High transportation costs, limited domestic sales and the lack of efficient logistics for the export of products annually brought down the grain market in the Asian part of the country. The only way to stabilize it was the purchase of grain to the state Fund.
Another thing is export-oriented regions of the southern Federal district and North Caucasus. There is virtually limitless (based on the size of the region) marginal market (export), minor transport shoulder to the buyers to specify the minimum costs for the movement of grain, favorable climatic conditions, providing yields up to 70 t/ha and above, low requirements target buyer (mainly importers from the Middle East and North Africa) quality parameters of grain products.
These factors allowed the majority of agricultural enterprises in the years since the crisis of 2008, "not to fall into bankruptcy", whilst maintaining optimum debt load. Remaining credit-attractive for banks, they were able to update the fixed assets, including sowing and harvesting equipment, structure crops using quality seeds and agrochemicals. Given the high economic returns from investing in agricultural production in these regions agricultural land is not empty, but rather, almost completely involved in the rotation. Therefore, the question of grain interventions in these regions practically did not rise, and regulation there are prices on the world market.
Given the high growth of grain production in the European part of the country, particularly for export and consumption, the agriculture Ministry began to talk about the need to abandon the intervention. If it continues to be supported by the active development of grain production, then I will be really sought after other more effective control measures. However, what we see now. If earlier, the relevant Ministry has actively called for the introduction of the maximum areas of agricultural land and increase agricultural production (including grain) excluding sales potential, now the Ministry of agriculture began to talk about the transition to a balanced trade-oriented consumers. Grovedale offers to change the structure of crop rotation, reducing the mass grown crops under wheat and increasing under maize, legumes (soy in particular) and technical agricultures that in value terms they look more profitable and in great demand in both domestic and global markets. Thus, we can return to the situation when grain interventions have been claimed.
The market needs support
All this speaks in particular about the lack of strategy of development of Russian grain production. Although the most important condition for a stable and profitable agricultural production because of its seasonality, technological and economic inactivity is to establish long-term rules of the game for the participants of the grain market. It is the lack of a long-term strategy has led to imbalances of the balance of production and consumption of grain. Hence most of the problems of farmers in the season 2017/18. Among the main challenges is the extremely low prices of the domestic market, a shortage of Elevator capacities and training of transport logistics.
Last year was a record harvest, according to Rosstat, the 135.4 million tons in weight after processing. Farmers had hoped that the higher the result of their work, the more will the economic and financial impact from their work. And if they see lower prices, as in previous periods, procurement will be carried out grain interventions at a reasonable price. But this did not happen. Have changed the "game rules" and proposed a measure of market support, ensuring equal conditions of access to export markets to producers from remote regions by compensating part of the cost of rail transportation of grain.
In the fall of 2017, an agreement was reached with the Russian Railways to provide discounts on railway transportation of 10.3% to the rates on the export destinations of the 13 regions from stations located in the Voronezh, Orel, Tambov, Orenburg, Saratov, Novosibirsk, Omsk, Kursk, Lipetsk, Penza, Samara, Ulyanovsk and Kurgan regions. This measures the cost of grain has changed the downward trend of stabilization and slight increase in the European part of the country. While in Siberia and the Urals subsidizing transportation had virtually no effect on the change in the pricing environment. At the end of 2017 was approved the grant of compensation to the regulated part of the cost of railway fare.
The idea of providing discounts on rail transportation of grain for continental grain-producing regions is very good and useful for the development of interregional and international trade relations. However, taking into account regional specifics and existing problems with grain carrier fleet of its productivity remains low. From the Siberian regions with this privilege exported about 300 thousand tons of grain, but average prices in the Asian part of the country remain low and comparable to the level of cost.
One cannot choose only one method of market support. Required based on regional characteristics and opportunities to use all possible measures that will ensure acceptable profitability of grain production.
According to the NHS, a range of measures, first, should provide a number of operational decisions. This, in particular, can be, and the same purchasing grain interventions, with the possibility of redemption, and the reduction or payment of the cost of railway transportation. Increasingly it is necessary to stimulate the export of grain, primarily by improving transport and logistics infrastructure, the creation of port and cargo handling land grain terminals in the South, East and North-West directions, and support to promote Russian agricultural products abroad. In addition, support for the market will be the provision of soft loans to processors for the purchase of raw materials and promotion of exports of flour. After all, with total global sales of wheat flour at 16 million tonnes, the export of Russian flour production so far does not exceed 250 thousand tons a year.
Secondly, we need long-term solutions aimed at expanding the geography of foreign supplies of grain. The most promising markets are Southeast Asia, high quality durum wheat demand in the EU and the countries of Europe and Asia are now ready to acquire organic products. Another long-term measure should be the promotion of livestock in surplus regions and organization of deep processing of grain and production of biofuels.
However, until now only implemented transport and export components. As a result, in the Asian part of the country prices are below the intervention for 3 thousand RUB./t. It has dealt a serious blow to the economy of agricultural enterprises and continues to accumulate losses, which are now estimated at least 50 billion rubles, and this figure will only grow.
The author is President of the Board of Trustees of the National Union of grain producers Pavel Skurikhin. The article is written specifically for "the Agroinvestor".