Grain crisis in Russia: no exports to the EU.
Russia’s grain shortage is hitting the nation hard. Exports are banned and prices are rising fast, leading to global knock-on effects that will see Europe needing to find alternative supply sources.
The heads of a number of Moscow bakeries are reported as saying that from July to early August, the price of flour rose by 50 per cent. Further down the supply chain, millers said their bill from suppliers had gone up by at least a third.
“In the last two weeks we have already received two letters from suppliers saying that bread prices are climbing by a minimum of 20 per cent,” one shop manager reported, whilst in some establishments the final cost had risen by 40 per cent.
Scorching heat and drought in 34 regions have cut supplies by a third. Last year the harvest was 97 million tonnes of grain but this year analysts are predicting a maximum of 65 million tonnes. Domestic demand is in the region of 77-78 million tonnes.
Meanwhile milk yields have also dropped as overheated dairy cattle are producing less.
In shops close to residential areas the price of milk has risen by 25 per cent, coming perilously close to the 30 per cent ceiling where the government can impose legal limits on further rises. In the street markets the situation was a little better, with bread rising by an average of 13 per cent and milk 9.3 per cent, according to Russian press.
Quite apart from the fact that purse strings are tight after the crisis, the shortage of Russian grain has come at a bad moment. World grain prices had already increased by 32 per cent when Prime Minister Putin slapped a ban on grain exports. After he announced the ban they rose by another 50 per cent. It is at these prices that Russia will now have to buy in grain.
This week it was announced that the Moscow regional government has ordered up to 300,000 tons of grain from Kazakhstan. The order was confirmed by the Kazakh agriculture ministry, RIA Novosti reported, adding that the commission came directly from Yury Luzhkov, Moscow’s mayor.
Large scale imports would take agricultural policy back 20 years. Agricultural market analysis company Sovekona. Executive Director Andrei Sizov told Vedemosti that Russia could not only import several million tons of grain but become a net importer. The implications for Europe are potentially serious, as Russia has traditionally been an importer of Russian grain. But as always in politics, there are winners and losers. Russia looks set to feel more pain, whilst the Kazakhs are likely to benefit from both the abnormal weater conditions, and from the price rise resulting from Putin's export ban, as Kazakhstan reportadly expects to export 8 million tons of grain this year.
Canada may also be a beneficiary of the price rise, as Statistics Canada relaesed estimates this week putting wheat output at 22.66 million tonnes, way above earlier predictions.
RUSSIAN FIRES - ARSON?
Gary,
I am sceptical that these fires that have occurred in Russia are solely because of the heat as the news media keep telling us.
I cannot help but wonder if it is arson, therefore politically motivated.
Who has the most to gain from this severe grain crisis?
Are there people hiding in the wings waiting for an opportunity to seize power when the population get angry at the governments incompetent handling of this crop crisis?
The Russians are a stoical people and are used to adversity, but something of this nature resulting in severe shortages and very high prices of stable foods could cause unrest and result in political instablility.
If other countries take advantage of Russia's dire situation and up the prices of wheat then this be catastrophic too.
It will take years for the land to recover from these fires, and for crops to establish themselves to the same level of growth as before the fires.
Russia will not take kindly to being taken advantage by other nations during this period of regrowth of its crops, and could, when productivity of crops is back to 100% decide to change their policy regarding the export of wheat.
During the Soviet Era, if I remember correctly Russia did not trade grain, simply because they recognised that the needs of the Soviet people over the vast continent of the Soviet Union came first.
This crisis will have a knock on effect on cattle, who needs grain to produce milk and meet. From a load of bread to Pizzas, from eggs to cheese and milk, prices will rocket.
How this crisis is handled and the trading deals that Russia can obtain from other countries to keep prices low for the consumer will be judged by the electorate who will vote not only with their feet but their stomachs too.