Russia’s new grain export quota unfavourable for small traders

Russia’s new grain export quota unfavourable for small traders

Russia, the world’s largest wheat exporter, is going to limit grain exports to 15 million tonnes for the second half of the current marketing season. The Ministry of Agriculture will distribute the quota among traders depending on export data for July-December. However, the quota mechanism is unfavourable for both small sellers and minor buyers, warn experts.

Russia’s grain export quota for the period between 15 February and 30 June 2021 will consolidate the market positions of major traders, which are often state-controlled and have crucial access to port infrastructure, and speed the exit of smaller players, says Successful Farming citing analysts. A proposal by the Ministry of Agriculture, which is yet to be formally approved by the government, entails distributing the quota of 15 million tonnes of grain among exporters based on their share of grain exports in July-December.

In recent years, large Russian exporters have increased their market share, while the number of smaller trading companies has fallen steadily. According to Yelena Tyurina, chief analyst of the non-government farmers’ lobby group Russian Grain Union (RGU), the number of firms supplying Russian wheat to other countries has fallen to 110 this season. By comparison, it amounted to 216 in July-November 2019. She noted that small traders, which exported no more than 30,000 tonnes a season, were among those who left the Russian market. “The quota will galvanise this process,” considers head of IKAR agriculture consultancy Dmitry Rylko.

Industry experts also consider that the loss of smaller traders will disrupt supplies to secondary seasonal importers. “Small markets will be lost due to small players leaving,” commented head of the RGU Arkady Zlochevsky. In addition, Russia may lose markets that tend to import in the second half of the season such as Mongolia due to the quota.

Nonetheless, analysts still consider the new quota to be an improvement. The previous export quota caused turmoil, as it quickly ran out due to a spike in demand from traders rushing to secure customs documents for future shipments.

Meanwhile, Russia has already exported 20,1 million tonnes of grain since the start of the current marketing season on 1 July. At the beginning of November, Russian wheat export prices edged up amid quota expectations. The system proposed by the Ministry of Agriculture provides traders with a stimulus to export more until January to secure a bigger quota, but is overall neutral for the market, according to SovEcon research company.

By Anna Litvina