By John Helmer, Moscow
Russia’s grain traders have applied to Mother Nature (image centre) for help in deciding whether Russia’s weather this spring and summer will be so mild, sunny and also wet as to produce a bumper harvest , allowing exports to resume and Russia to retake its place as the third largest grain exporter in the world. That is to say, at least one of the powerful domestic traders — Aston Corporation of Rostov-on-Don, headed by Vadim Vikulov (image right )– believes it knows Mother nature’s answer well enough to publicly accuse the Russian Grain Union, headed by Arkady Zlochensky (image left), of failing to lobby hard enough for the Kremlin’s export ban to be lifted before the due date of July 1.
Since the government’s review of the summer harvest isn’t scheduled until April, and Russian agro-industry experts don’t yet agree on the volume of this year’s harvest, compared to last year, it isn’t clear what is the real reason for Vikulov to announce the loss of confidence in the Grain Union on behalf of a new group calling itself the National Association of Exporters of Agricultural Products (NAESP).
And here’s another funny thing — after publishing his manifesto in this morning’s Moscow Kommersant, Vikulov instructed a spokesman at Aston to say the only thing he is now prepared to confirm is that the new NAESP exists, and he’s the head of it.
At the Russian Grain Union, Alexander Korbut claims he doesn’t know what is going on, either with the weather, or among the grain exporters. If they have decided to form a new association, he said, “it means they had their reasons for that. I have no idea why they would need a new structure, and this is a question for them, not to the Grain Union. We have always said that export restrictions have a negative effect on the market. Yes, we admit that the government observed a kind of logic in banning the exports, but we have never said we are happy with this logic. I’m not avoiding your question, but there is really nothing to ask me about.”
The finger-pointing appears in a newspaper placement with the usual Russian fingerprints indicating the source was Vikulov, and that there was inducement to inhibit Kommersant from inquiring whether anyone agrees with Vikulov, either in the grain trade or, more importantly, at the federal Ministry of Agriculture.
Claiming he speaks for 60% of Russia’s grain traders and exporters, Vikulov has declared he wants to replace the grain embargo with more “civilized” means of limiting grain movements. What these might be Vikulov doesn’t, and won’t say. “Simply, we believe that the export [of grain] is an important link in the food market and our efforts to improve the rules on this in the form of separate associations would be more effective.”
He implies that the Grain Union was responsible for the grain embargo by failing to oppose it when Prime Minister Vladimir Putin imposed the measure last August, even though Putin allowed traders a 10-day window of opportunity to ship as much as they could lay their hands on. They did.
The first expiry date announced for the export ban was December 31, but as the grain traders started speculating on a rise in flour and bread prices, the ban was extended until July 1 of this year. The sequence of decision-making can be read here.
Since the year 2000, noone in the history of Russian business has openly criticised the president, now Prime Minister Putin for deciding against their interests – with one exception, Mikhail Khodorkovsky. In February of last year, Mikhail Prokhorov complained that Putin had been mistaken in criticising his use of state investment funds for TGK-4, an electricity utility company, but Prokhorov changed his mind and tune within a few hours.
The grain export embargo is high state policy, backed with equal vigour by President Dmitry Medvedev and the deputy prime minister in charge of the farm and food sector, Victor Zubkov. This is because this is an election year, and keeping food prices down (as well as fertiliser and other prices for inputs to farming) is a priority to conserve pro-Kremlin votes.
According to Zubkov’s latest statement of the policy — a statement reported by Interfax on March 2 — the grain export embargo may be extended until after the parliamentary election, which is expected to take place in the first days of December. “The ban on exports can be maintained until the end of 2011. Such decisions [are not taken] yet, but if the situation continues to unfold, so that we have to ensure a reliable [grain supply]…maybe I do not rule out.”
Rather than complain about the Kremlin position, Vikulov is quoted as attacking the Grain Union for not coming out loudly in favour of shortening the embargo. “All this time,” Vikulov said, “exporters have been forced to adopt such rules of the game, so that the situation on the food market is that it is not allowed to actively advocate for the early termination of the embargo.”
In principle, the Grain Union says it would support early termination of the embargo if there will prove to be enough grain from the new harvest to cover the domestic market requirement, keep bread prices down, and incidentally keep Putin calm. For the present, there is a surplus of grain in the southwestern region, but this doesn’t mean that state stocks and the new harvest will be enough to meet the pre-election standard of supply countrywide.
Because of last year’s drought and fires, the Russian harvest came in at 64 million tonnes. By planting over a wider area during this winter and early spring, the 2011 harvest may do no better on yield per hectare, but still generate up to 89 million tonnes, which is much closer to the Russian norm. If the weather deteriorates in either direction of too dry or too wet, that aggregate may dwindle to 83 million tonnes.
Zlochesvky’s experts are already forecasting a harvest of between 83 and 86 million tonnes. Among the western forecasters, the US Department of Agriculture is waiting until next month before putting its finger in the air and the soil, and announcing its target. Sovecon, the Moscow-based research consultancy, has widened its forecast range so that the chance of being wrong is lessened; its current forecast is for a harvest of between 75 and 85 million tonnes.
Before exports can be resumed, the federal Ministry of Agriculture will have to assure Putin and Zubkov that it is confident (certain) that the domestic comsumption requirement of up to 75 million tonnes will be met, plus at least 10 million tonnes for either domestic standby or foreign trade.
The Ministry has postponed its forecast, but the calculation requires a harvest of 85 million tonnes before the embargo can be lifted. This is arithmetic, and Korbut of the Grain Union isn’t challenging it. Exactly where Vikulov’s fingers currently are for the count isn’t clear.
He has announced that the state-owned United Grain Company (OZK) is a member of the new association, and thus implies that it advocates lobbying Putin for a start to trading before July 1. OZK hasn’t been sitting on its hands during the embargo. This story suggests it has been taking advantage of the loss of export sales and financial difficulties of some of the bigger grain exporters to press them into bankruptcy, and buy up their assets at a bargain price.
If anyone has the standing to lobby for early exports, it is OZK. So it was asked whether it has joined Vikulov in the new association to do just that. OZK’s spokesman Victor Krupenin. says he cannot confirm this. As for OZK’s challenge to Zubkov’s warning of a December 31 embargo, Krupenin promised to comment soon.
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