Buckwheat riot: rising food prices threaten to turn into a severe crisis

As you know, the Russian authorities banned the export of buckwheat from the country. The ban was introduced "in order to ensure food security". This decision was quite expected, and according to experts, the announcement of it was postponed due to Putin's address to the Federal Assembly on April 21, and immediately after this event, the Agronomics channel wrote:

“The Ministry of Agriculture plans to expand the area under crops and limit the export of buckwheat and buckwheat in order to avoid sharp price hikes in the domestic market. Shipments of buckwheat abroad have increased significantly since November 2020. According to the Federal Customs Service, since the beginning of the season, Russia has exported about 220 thousand tons of buckwheat against 79 thousand tons for the entire last season.

The largest importers: China - 26.2 thousand tons, Latvia - 14.3 thousand tons, Ukraine - 13.2, Lithuania - 9.8 and Japan - 8.5 thousand tons.

The buckwheat market is now balanced, there are enough stocks to meet the demand in the domestic market. Manufacturers set the price themselves. If it grows, then they need money. Most likely to get involved in the export race. Experts disagree on whether it is worth limiting the export of buckwheat and how the plans of the Ministry of Agriculture will affect the market.

First, an increase in acreage and the creation of surplus stocks can lead to overproduction. And this will undermine the market balance and "freeze" the industry for two or three seasons.

Secondly, the introduction of the ban is unlikely to affect prices. They will decline anyway after the new harvest in the second half of the year.

On the other hand, it makes sense to limit the export of buckwheat until the new harvest - the demand from importers, especially China, is very high. And this greatly fuels the appetites of Russian producers, because in 2020 the PRC introduced duties on the import of buckwheat from Australia, its main supplier.

One thing is obvious, whatever the decision of the Ministry of Agriculture, it should take into account not only the price dynamics, but also the development of the industry. If, by the decision of the ministry, the access of farmers to export markets is limited, then there will be no point in increasing the sown area ... "

However, the experts of the Bla-blanomika channel questioned the validity of such a decision of the Russian government:

“Market participants explain: costs are growing, and the harvest was not the best. But representatives of the Ministry of Agriculture do not see this point-blank, but they declare about some record (!) Buckwheat harvest in 2020. They say that the farmers have a pot of water, but they take out bad things abroad ...

In fact, we have the following:

In March 2021, the average consumer price of buckwheat was 94.3 rubles / kg (+ 31.6% in annual terms). But it should be noted that this is far from the highest price - we observed a similar level in the summer of 2016, and in 2011 the price reached 112.02 rubles. At the same time, producer prices of buckwheat groats in March 2021 increased by 52.4% in annual terms. So it is understandable that they want to somehow recoup the costs by increasing the selling prices.

In the Ministry of Agriculture, apparently, they do not really understand the meaning of the word "record". Indeed, in 2020, 892.2 thousand tons of buckwheat were harvested - yes, as much as 13.5% more than in 2019. But this is not yet a reason to claim a record. The harvest was good, but it was the second lowest in the last 5 years. But in 2017 there was really a record - they harvested 1,524.9 thousand tons of buckwheat - 1.7 times more than in the "record" 2020.

And finally, is it true that everything is exported abroad at a rapid pace? Well, how can I say ... According to the Federal Customs Service, in 2020 only 59.2 thousand tons of buckwheat were exported - this is 9.5% less than in 2019, and 20.1% less than in 2018. In January-February 2021, 23.3 thousand tons were exported - yes, almost 3 times more than in January-February 2020, but, excuse me, then there were no restrictions on export - it is not surprising that these small volumes ( by the way, they certainly did not determine the pricing in the domestic market) tried to export before the quotas and duties on grain export began.

So the arguments of the manufacturers are clear, but the claims of the departments are not very good. And myopia scares them. There would be no incentive for the industry to achieve truly record collection rates. And with the regulation of prices, we can reach the point that buckwheat will become even more expensive than meat by the fall ... "

But the experts of the Kremlin Mamkoved channel predict a severe food crisis for the country:

“Large grocery chains and suppliers announced a new rise in the cost of cereals: buckwheat prices are expected to rise by another 10-15%, despite the already unprecedented growth of 36% over the past six months.

Bloomberg confirms the upward trend in the global market, making it an international trend. A similar level of criticality was observed earlier: 10 years ago, the rise in prices for basic food products in the regions of the Middle East brought the situation into an acute political crisis, which was close in intensity to the times of the Arab Spring. Russia, forced to impose a ban on the export of grain products, exacerbated the situation, which led to massive, violent protests in the region.

Today, the role of "drought" is the global disruption of production chains due to the coronavirus infection, which is devastating the middle class in developed and developing countries. By increasing the price, producers are insured against political risks arising from potential new restrictive measures, while not experiencing a shortage or surplus of goods. This situation is typical even for developed countries.

Russia, as a peripheral developing country, in any case falls under the unique situation that is occurring: hunger with an excess of food. The observed rise in prices for basic foodstuffs is the beginning of a future new and extremely difficult crisis..."

In this regard, publicist Nikolay Podosokorsky recalls:

“Before in Russia there were salt, grain and copper riots, but this time a buckwheat riot could have happened. Back in the 19th century, Otto von Bismarck spoke about affordable buckwheat as the basis of Russian stability..."

The Russian Grain Union warned the Russians against "buckwheat panic".

The worst that can happen now is panic demand for buckwheat, which will lead to an increase in prices, explained in an interview with Sputnik radio Vice President of the Russian Grain Union Alexander Korbut.

"The export of buckwheat this year is significantly higher than last - more than 100 thousand tons have already been exported, and in the past, if I am not mistaken, about 25 thousand tons, so such a reaction was undertaken to restrict exports. This is an attempt to keep prices down. that the export ban will remove additional demand from the market, export, respectively, more resources will remain within the country, and this will balance supply and demand to a better degree. And producers are deprived of the opportunity to earn additional income - export", - the expert noted.

There are other factors affecting the cost of buckwheat in Russia, Alexander Korbut added.

"Now further, prices for buckwheat will be determined by forecasts for the next year: what will be the costs, the intentions of agricultural producers for the sown area, what will be the forecasts of gross production. According to our estimates, our sown areas will not decrease, and the yield will not be lower than in the past. year, that is, we are provided with all the resources. And now we are sufficiently provided, and in the future. But it must be remembered that the costs of agricultural producers have also increased, because fertilizers and metal are becoming more expensive, they buy equipment and spare parts that do not get cheaper. And for processors, the costs for transportation are growing, and for various consumables, for electricity. Compensatory growth should still occur", - the expert said.

The vice-president of the Russian Grain Union also warned Russians against trying to stock up on buckwheat for future use.

“I hope that now there will not be such a shortage as at lockdown. Then many bought such volumes of buckwheat that - I firmly believe - they still didn’t finish eating something. If someone runs to buy buckwheat, this will be the worst scenario for the development of the situation, because that demand will exceed supply and trade will raise prices. Consumer panic is the most negative thing that can be, and for the consumer himself", - Korbut concluded.