by PressDuties on grain export in Russia have a negative impact on the profits of farmers
Why Russia’s new grain export duties should be reconsidered
The Russian government imposed duties on grain exports, and their negative impact has already begun to be felt by local producers. Agrarians have calculated that in the 2021/2022 marketing year the new rates from the authorities will lead to a decrease in revenue of 3.5 billion rubles. The consequence of duties was also a decrease in grain prices in the domestic market, which also had a negative impact on farmers.
Out of this amount, 2 billion rubles is accounted for by the reduction of export revenues, of which almost the whole amount is the sale of wheat. This conclusion was made based on the estimation of supplies at the level of 38 million tons.
Apart from financial losses, the experts also point out that transition to floating calculation of duties had a negative impact on the volumes of export, reduction of purchase of machinery and slowdown of technological progress. In addition, it became much more difficult for farmers to predict their activities in the long term. This is due to the fact that duties for the next week are formed on the basis of the average value of contracts, which is observed within 7 days. Another factor is decreased competitiveness for small ports, which account for cargo turnover mainly in the domestic market. Export shipments themselves become uninteresting for producers, and they are in no hurry to ship products, as a result ports are idle.
According to analysts, this situation has two variants of development — in short-term and long-term perspectives. In the first case, there will be an oversupply in the market and the price of products will go down. In the future, farmers will not be interested in grain production, as it is not profitable. As a result, the cultivated area will shrink.
Despite the negative factors, the new duties have positive moments as well. The latter include reduction of influence of the world cost of grain on domestic price tags, thanks to which processes on the Russian market have stabilized. This factor is relevant in view of regularly increasing figures for products.
However, experts note the need to change the mechanisms of export duty calculation and to take care of events that will help producers to establish processes under the new rules. Another solution could be to increase the duration of the duty, for example, it will be valid not for a week, as it is now, but for two weeks. In addition, it is possible to raise the threshold, which is not subject to this tax from 200 dollars to 250 dollars per ton of wheat. Then the export price for farmers will be more attractive, and they will be able to reduce losses. The duty on rapeseed should also be revised downward from 30% to 15%.
In general, Russia has all opportunities to improve export mechanisms and increase export volumes. However, for this purpose it is necessary to abandon a number of approaches that are used in the market.