EU imposes punitive tariffs on grain imports from Russia and Belarus from July 1

Customs duties on grain, oilseeds and their processed products will be increased to such an extent that their import will become unprofitable. The measures will also affect imports of peas and beet pulp pellets. According to grain market experts, however, the increase in tariffs will not have a significant impact on Russian grain exports.

The EU Council has decided on prohibitive tariffs on grain imports from Russia and Belarus from July 1. The resolution states that tariffs on cereals, oilseeds and their processed products will be increased to such an extent that imports of these products will be stopped in practice. The measures will also affect imports of peas and beet pulp pellets.

None of these products will have access to EU tariff quotas either. At the same time, the EU Council announced that no customs duties will be levied on the transit of grain through European ports to third countries.

According to grain market experts, the increase in tariffs will not have a significant impact on Russian grain exports, but could complicate the situation for livestock farmers and processors in Europe. This is according to Alexei Zubets, Director of the Institute for Socio-Economic Research at the Financial University of the Government of the Russian Federation.

“I don’t think Russia has to fear any negative consequences, because Russian grain is in active demand all over the world. If we take any country in Africa and see what goods we trade in, we will always find food, flour, bread and so on there. Recently, world grain reserves have been shrinking, and in these conditions Russia will definitely have no problem selling the Russian harvest elsewhere. If we talk about the EU, then France and Germany are the main producers of grain, by the way, France and Germany export a significant amount of grain, this grain is mainly used for bread, it is high-quality grain suitable for making high-quality bread, and Russia exports, among other things, valuable varieties, but most of what Russia supplies to the whole world is so-called feed grain for livestock, i.e. grain from which compound feed is made. And this grain is needed by many countries in Europe, because there is a large production volume there, a large number of livestock, and they need to be fed. So if the EU refuses to buy Russian grain, it will only lead to an increase in feed prices or prices for agricultural products, i.e. the consequence of such a refusal will be another round of inflation, and European agricultural products will no longer be competitive on the world market, and the same Turks will be happy to sell Russian grain to Europeans as middlemen.”

Meanwhile, export prices for grain are rising on world markets. Over the course of the week, Russian grain prices rose by almost 4%, and prices for the new harvest exceeded the cost of the old harvest. According to Kommersant, hedge funds are driving up prices, while many genuine buyers are still taking a break. The market has overcome the traditional discount for the new crop: Contracts are now being signed at a higher price of $250 per ton.

Russia is one of the largest wheat suppliers. The country accounts for a quarter of the world’s export volume. The main reason for the increase in export prices is the lowering of the forecast for the Russian wheat harvest from 90 million to 86 million tons due to frost. In the European Union, wheat production in the new season could also fall by 4% to 120 million tons due to rainfall in France and Germany.

Nikolay Lychev, expert on the agro-industrial complex and editor-in-chief of the Agrotrend.ru portal, continues.

“The EU has large quantities of Ukrainian grain, Ukraine is ready to increase its supplies to the EU market, and Ukrainian grain is cheaper than Russian grain, so Europe will only benefit from the ban, and Ukraine will benefit, and Russia will not lose anything, it’s just a political decision, what is and what is not, it has no effect on our markets and on the overall market of world trade in grain.”

Where will we take the surplus?

“The quantities are so small that they can be sent anywhere. The traders in the ports form impersonal export consignments with their large ships, which are sent to Egypt, Bangladesh or wherever. If we export more than 65 million tons of grain per year, there is no point talking about these 1.5 million tons, we will eventually consume them ourselves.”

How will grain prices behave as they are rising now?

“This will not affect prices in any way, prices will be influenced by other factors. The general increase in the number of hungry people in the world, the poor harvests in major producing countries such as Russia, the US, the EU and Australia are affecting prices, and new balances are being formed on this basis. Although the situation is not bad everywhere, the same bad harvest in Russia has pushed up grain quotations by 15-20% at the end of May, which will affect prices, as Russia has more than 145 countries that consume wheat.”

According to Dmitry Rylko, Director General of the Institute of Agricultural Market Conditions (ICAR), grain exports – excluding pulses – to EU countries will amount to about 1.5 million tons of wheat this season.

Source: BFM.ru (Russia)