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by John Helmer, Moscow 

It was the English writer G.K. Chesterton who remarked that “compromise used to mean that half a loaf was better than no bread. Among modern statesmen it really seems to mean that half a loaf is better than a whole loaf.”

In the current war against Russian grain, less than half a loaf is what the European Union (EU) will get from its announcement last Thursday, May 30, of a prohibitive new import duty of €95 per tonne of cereals in order to ban Russian (and Belarusian) grain from entering the European market. Imports of oilseeds and derived products, as well as beet-pulp pellets and dried peas,  have also been barred.

In its official announcement,  the EU declared trade protection for the EU’s grain producers to be the main reason for the new sanction, not the Ukraine war.  France leads the EU grain producers, followed by Germany and Poland.

“The EU’s imports of grain products from Russia have significantly increased since Russia’s full-scale invasion of Ukraine on 24 February 2022,” the EU announcement said. “While the Russian Federation remains a relatively small supplier of those products to the EU market, it is a leading world-wide producer and exporter of those products. Given its current volumes of exports to the world, the Russian Federation could reorient significant volumes of supplies of those products to the EU, causing a sudden inflow from its large existing stocks, thereby disrupting the EU market.”  

For “disrupting the EU market”, read commercial threat to French, German and Polish growers.

The EU statement added “there is evidence that the Russian Federation is currently illegally appropriating large volumes of such products in territories of Ukraine, which it illegally occupies, and routing them to its export markets as allegedly Russian products. These measures will therefore prevent the EU market from being destabilised, halt Russian exports of illegally appropriated grain produced in the territories of Ukraine and prevent Russia from using revenues from exports to the EU to fund its war of aggression against Ukraine.”

In 2023 Russia exported 4.2 million tonnes of cereals and related agricultural products to the EU worth €1.3 billion. In volume, there had been a surge of 56% in Russian grain shipments to the EU from 2022 to 2023.  Notwithstanding, the proportion of Russian grain in the European market has remained less than 1%.  

The Kiev regime – currently barred from exporting its dumping-price grain to Poland and other neighbouring EU states  – has been complaining that Russian grain should not have an advantage in the market. The Defense Ministry in Kiev and the state-funded think tank of the Kiev School of Economics are the sources of the Russian grain theft allegation, which was first broadcast by CNN in March 2022.  US satellite and other intelligence was then used by CNN to repeat the Ukrainian allegation in May 2022. Just before, Reuters, the US propaganda agency based in New York, repeated the allegation, adding “the Kremlin denied Ukraine’s allegations, saying it did not know where the information was coming from.”  

The British Broadcasting Corporation (BBC) repeated the allegation with additional state-supplied intelligence in June 2022, but the propaganda organ acknowledged that an uncounted tonnage of the allegedly stolen grain had come from Donetsk and Lugansk, after they had seceded from the Ukraine but before they changed their status from people’s republics to Russian regions.

The BBC also claimed that “part of the grain that ended up in these territories directly belongs to the Ukrainian state. These are the grain of state-owned enterprises and strategic reserves in case, for example, of a war that has actually begun.”  

After the United Nations (UN) Secretary-General’s office took over supervision of grain shipments from the Ukraine and Russia through the Black Sea in what was called the Black Sea Grain Initiative Joint Coordination Centre in the third quarter of 2022,  the grain theft narrative from Kiev stopped.

With Russian grain harvests running at record levels of 158 million tonnes in 2022 and 143 million tonnes in 2023, the volume of exports to the EU amounts to less than 1% of the harvest;  less than 3% of total exports.

This harvest boom has made Russia the western world’s leading grain producer;  globally, it comes third after China and India.  The Russian farm success has also been forcing down global grain prices. This, according to a western grain broker, amounts to “Russian wheat strangling global market.”     “Rising Russian exports,” the broker adds, “increasingly aggressive [lower] Black Sea export pricing, surplus global stocks, waning international demand and the prospect of another massive crop in Russia this year drive global wheat values to their lowest level since the second half of 2020.” Strangling the global profits of wheat exporters in competition with Russia is what this means – Australia, Canada, France and the US. In short, the Ukraine war allies.

At the weekly Moscow briefing which followed the EU announcement in Moscow on May 30,  Foreign Ministry spokesman Maria Zakharova attacked the EU for hypocrisy in reducing market supplies and raising prices when it has been claiming its priority has been food security for the neediest grain-consuming states. “When the West begins to talk about prohibitive duties on Russian grain, I advise them to reconsider their own statements about food security, which they were insisting on two years ago,” Zakharova said. “From their point of view, everything was at stake in order to feed the countries in need. Are the same people, or is it their twins at the microphones, who are now saying exactly the opposite?”

“The Westerners lied two years ago. They had no interest in global food security. They just wanted to help fill the pockets of the major global players – mostly American, Anglo-Saxon companies – who were engaged in resale and made a huge fortune on margin. They used the situation of the moment, the political crisis in Europe, the world, and the situation in Ukraine in order to create opportunities for enrichment. It wasn’t just illegal. It was bloodthirsty. Now they’ve moved on to the next phase…The Westerners want to squeeze out Russia from everywhere. They hoped that our country end up destroying  its agriculture by joining the WTO and playing by their rules. That didn’t happen. Agriculture has been restored and feeds the world, fulfilling the capabilities of the Russian Federation and its natural wealth, responding to the call and obvious needs of various countries.”

Trailing after the French in manipulating the Ukraine sanctions war for commercial profit, there have followed the UN Secretary-General Antonio Guterres and his British associate, Martin Griffiths. To follow their scheming to stop Russia exporting grain and crop fertilizers, and to use Ukrainian grain exports to enable the Kiev regime to recover its Black Sea ports, read this    and then this.

Source: https://johnhelmer.net/

Vzglyad, the semi-official security analysis platform in Moscow, has just published its assessment of the reasons for the new EU attack on the Russian grain trade and the impact it will have on both sides.  The text has been translated verbatim without editing; pictures, URL links, and captions have been added for illustration and reference.

May 31, 2024
Russian grain will find new buyers instead of Europe
By Olga Samofalova

Europe is imposing protective duties on Russian and Belarusian grain. In fact, this means stopping exports from Russia. Why did Brussels continue to buy Russian grain, despite the rupture of many economic ties? And what will this new ban lead to?

The EU has now adopted a ban on the purchase of Russian and Belarusian grain. Protective duties come into force on July 1. The amount of duties was announced at 95 euros per tonne. The EU explained the need for such duties in order to prevent the “destabilization of the European market.”

Now Russia and Belarus either pay low duties or zero, says Belgian Finance Minister Vincent van Peteghem (right). At the same time, the EU assures that these measures “will not affect transit through the European Union from Russia and Belarus to other countries.” The extension of the increased tariffs to Belarus was also explained by the close economic and political ties between Moscow and Minsk.

The Kremlin has noted that Russia has many alternative supply routes, but European consumers may suffer. The global food situation may also worsen.

Why is Brussels taking this step? From a political point of view, the EU explains this as a nod  towards Ukrainian grain. Such a step became a new way to strengthen solidarity with Ukraine, said the Foreign Minister of the Belgian presidency of the EU, Ajah Labib.

“Europe has made such a decision, most likely, because foreign companies, including Cargill and Viterra, can no longer supply grain from Russia, and now only Russian companies are engaged in grain exports from Russia, which are coordinated by the Russian government,” says Ekaterina Novikova, associate professor of economic theory at Plekhanov University of Economics. In addition, this is a great opportunity for Europe to get rid of a rival in the local market with a better product and a more attractive price.”

“Russia has declared itself to be a significant competitive player in the global grain market, which means that it will try to increase its market share at the expense of other countries, including the European countries, Germany and France. The European rejection of Russian grain should help support local farmers. Another issue is that grain production in the EU has become expensive due to rising prices for
fertilizers and electricity. Therefore, in the near future, prices for grain products
in Europe may rise and cause dissatisfaction among European citizens,” Novikova concludes (right).

Many European farmers, especially the Bulgarian, Polish and Romanian, would, of course, be happy to get rid of Ukrainian grain rather than Russian. Because it has been the Ukrainian volumes which have put them on the brink of survival. However, it is impossible to impose protective duties against the Ukraine from the political point of view. Therefore, Brussels had to extinguish the internal fire against Ukrainian grain by allocating 65 million euros to support the affected farmers.

What are the consequences of such a step by the European Union?

One of the gainers from the EU ban on Russian grain imports is Viterra,  owned by the Swiss-based trader Glencore and two Canadian investment funds. The company acknowledges in its annual report, issued in March of this year,  that it has been pushed out of the Russian grain trade in which Glencore had once been dominant.  In March 2023, Viterra announced that it would exit the Russian market and divest entirely its Russian businesses, including the Black Sea grain export terminal at Taman port. “In October 2023, Viterra concluded the sale of these businesses for an aggregate consideration of $82 million resulting in a loss versus book value of $159 million.” The Glencore/Viterra exit from Russia meant that the company had become a Ukraine grain trader. “As at 31 December 2023, Viterra had total assets of $261 million (approximately 1% of the total Group assets) and total liabilities of $22 million (less than 1% of the total Group liabilities) in Ukraine, after considering all above-mentioned reductions.” These Viterra assets include grain terminals at Chernomorsk and Nikolaev.

According to the [Russian] Union of Grain Exporters, in 2023 the supply of Russian grain crops to the EU amounted to 1.5 million tons – 1.3 billion euros. However, Financial Times sources in the European Commission estimated this volume at 4.2 million tonnes of cereals, oilseeds and their processed products, but for the same amount – 1.3 billion euros.

As for Belarus, according to the estimates of the European Commission, in 2023 it sent 610,000 tonnes of cereals, oilseeds and their processed products to Europe for the amount of 246 million euros.

On the one hand, the volume of supplies of Russian and Belarusian grain is not critical for either  side. Even if we are talking about 4 million tonnes of grain which Russia sold to Europe, then as a percentage it is only 1% of the consumption of the European Union, so reducing these supplies will not affect either price growth or food security in Europe, says Nikolai Pereslavsky, head of economic research at CM Service.

However, the change of supplier is still unlikely to pass without leaving its mark.

“For sure, the change of the exporter of grain crops will affect their value, as logistics will become more expensive. First of all, the EU will begin to buy all French grain, and they can import the missing volumes from countries which are world leaders in the grain trade — from Australia, USA, Canada, Argentina, Romania and Bulgaria,” said Vladimir Chernov, an analyst at Freedom Finance Global. But the increase in grain prices should not affect all food products in the EU, he believes, only those goods which are produced from them.

It is worth understanding that during all these years, despite the geopolitical and economic confrontation, the EU continued to buy grain from Russia – and there were reasons for this. Russian grain is of higher quality, as it has higher standard indicators (such as bulk density ), Chernov notes. At the same time, its cost was more profitable and attractive for European consumers than their domestic supplier.

“This year, the cost of grain on the world commodity markets has increased significantly due to frosts in Russia in early May, so Russian exports should also increase in price. However, we assume that even in this case, the prices for Russian grain will still be lower than the  European ones: primarily due to the large volumes of exports, and secondly against the background of the likely provision of a discount due to difficulties with export payments and other external risks,” Chernov argues.

Thus, export prices for Russian wheat with 12.5% protein FOB Novorossiysk increased by almost 4% just in the week before May 24, and by as much as 15.6% in the month, the price index centre calculated.


Source: https://ahdb.org.uk/

US dollars per bushel

Source: https://tradingeconomics.com/commodity/wheat 

For Russia, the EU’s refusal to buy our grain is unlikely to be critical. A product of such quality and at such a price will definitely find a buyer. “Russian producers shipped 65 million tonnes to all foreign consumers last year. Therefore, this volume of 4 million tons is also not decisive for Russia. Most of the domestic grain is sold to Turkey, Saudi Arabia, Egypt and Iran,” Pereslavsky adds.

In the current agricultural season (July 1, 2023 – June 30, 2024), grain exports from Russia may reach a record of 68 to 70 million tonnes, Deputy Director of the Agroexport Federal Centre, Yevgeny Zaitsev,  said at the All-Russian Grain Forum last week. The figure of 70 million tonnes of grain for export, of which wheat amounts to about 53 million tonnes, was also announced by Deputy Prime Minister Dmitry Patrushev.

From last week’s Russian Grain Forum in Sochi -- left,   right.

It should not be difficult for Russia to find buyers for these volumes, Chernov agrees. After all, the EU was not initially the main buyer of our goods; traditionally Russian grain was bought by the countries of the Middle East and the CIS. Last year, the main buyers of Russian grain were Turkey, Egypt, Iran, Saudi Arabia, Kazakhstan, Bangladesh, Algeria, Pakistan and Israel. None of these countries refuses to import Russian grain, therefore, most likely, the lost EU volumes will be redistributed to them, Chernov believes.

Based on the UN COMTRADE data for value (USD), Israel’s importation of Russian grains had a one-year peak in 2018, and since then it has dwindled to below $7 million annually. Corn for animal feed has been the principal Israeli import. Source: https://tradingeconomics.com/

The good news has been the opening of the Indian grain market for imports. The country plans to waive its 40% duty on imported wheat, hoping to resume its supplies, including from Russia. The Indian market could just take over 4-5 million tonnes of grain falling out of the European market.

June 1, 2024 -- source: https://www.bloomberg.com/
The Indian decision to allow wheat imports is a temporary expedient to cover the shortfall of a poor harvest in 2023. However, negotiations are under way for a long-term agreement on imports of pulse crops from Russia, pea and lentil in the first instance.  

As for the next season, according to Deputy Prime Minister Patrushev’s forecast, in 2024, despite the frosts, at least 132 million tonnes of grain are expected to be harvested, of which about 85 million tonnes are wheat. Such harvest volumes will allow Russia to supply up to 60 million tonnes of grain to foreign markets.

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