Grain of truth. FAO and Altai Grain Forum

In the first three days of March, the XVI Winter Grain Conference was held in the city of Belokurikha in Altai Krai. The forum was organized by the Altai Grain Processors Union, Altai Grain Conferences, ProZerno, and the Institute for Agricultural Market Studies (IKAR).  

Altai Krai is one of the leaders in the Russian Federation in the production of high-quality grain and its processed products. It is here that the Winter Grain Conferences have been held regularly since 2008.  

At the forum, experts traditionallydiscuss a wide range of topics, from macroeconomics to market trends and specific market situations, address issues of concern to farmers and processors alike, and present the first grain price forecasts for the coming season. 

The farmers of Altai Krai (5.9 million tonnes of grain and grain legumes) also contributed to this year's "historically record harvest" on the Russian scale (154 million tonnes), as Valery Gachman, president of the Altai Grain Processors Union and director of JSC Grana, noted. But at the same time, there is a "diversification" of acreage in the region and wheat is clearly no longer the dominant crop.  

As before, Altai mainly supplies these products to other regions and for export, often "in the form of flour, cereals, and compound feeds," Valery Gachman noted. New markets outside "unfriendly" countries are also being developed. It is clear that difficulties arise because there are no "empty markets" as such. Nevertheless, there is a demand for Russian agricultural raw materials and value-added products.  

Today, the exorbitant railway transit tariffs introduced by Kazakhstan have become a big problem for the supply of products of Altai farmers to the countries of Central Asia and Afghanistan (in total, we are talking about 80 million end consumers). At the same time, Kazakhstan, which is part of the Customs Union with Russia, buys Russian grain and then resells it to Central Asian republics, Valery Gachman said.  

Meanwhile, discriminatory transportation tariffs make Altai grain less competitive. This is a problem "with a geopolitical inclination," the expert noted. In this regard, the Union of Grain Processors of Altai appeals to federal and regional authorities, in which it has found understanding and support. 

In his presentation on "Global grain market trends: opportunities and prospects", Igor Shpakov, consultant at the FAO Liaison Office with the Russian Federation,noted that FAO analysts expect a grain harvest of 2 765 billion tonnes in the next agricultural season, 1.7 percent below the previous season. The bulk of the increase will come from wheat harvests in Russia and Australia. 

"An increase in global grain production against the limited available arable land will be achieved through increased yields (introduction of improved varieties) and the use of modern farming methods based on precision farming practices," the FAO consultant stressed. 

By 2031, global grain consumption will increase by 11%, mainly driven by countries such as India (+17 million tonnes), China (+8 million tonnes), Pakistan (+6 million tonnes) and Egypt (+4 million tonnes). 

Also by 2031, global grain acreage is expected to increase by 19 million hectares, of which corn ‒ plus 5% and wheat ‒ plus 3%, with almost half of the increase (9 million ha) coming from Asian countries, particularly India and Kazakhstan.  

In eight years, world grain production as a whole will increase by 343 million tonnes (+12%). Corn production will increase by 50% (with the US, China, and Brazil leading the growth). By 20% – wheat (India, Russia, and Canada). 20% – rice (India, China, Thailand, Vietnam, Myanmar, and Cambodia).  

In the next 10 years, China will remain the largest wheat producer, but at the same time its largest consumer. 

The total volume of wheat sold on world markets will reach 217 million tonnes by 2031. At the same time, Russia will retain its position as a leading exporter with a world market share of 22%. 

Among the trends in the global market, the FAO expert singled out "a decrease in demand for cereals" as a result of two circumstances: "a slowdown in demand for cereals used as feed and raw materials for biofuel production, as well as the fact that grain consumption per capita in many countries has reached the saturation level." 

In conclusion, Igor Shpakov listed the existing risks for the agricultural sector and, in general, for global food security. Along with armed conflicts, these risks are "the negative consequences of climate change, as well as economic shocks caused, in particular, by the coronavirus pandemic, hasty decisions in the implementation of the "green course" and the growth of the world's population." 

At the same time, "grain prices will continue to remain unstable," Igor Shpakov noted, since they will be affected by factors such as the high cost of fertilizers, plant protection products, transportation, as well as inflation." Armed conflicts and fluctuations in yields across countries, depending on weather and climate changes and economic turbulence, will make an equally significant contribution to market volatility.   

In his report, Alexander Lukyanov, Deputy Chairman of the Government of Altai Krai,summed up the results of the agricultural year of the region "Agricultural production index of the region was 104% in 2022. Some people think it is not much, but in fact it is significant. The growth is mainly due to the production of cereals and oilseeds. The gross grain harvest in the region was 5.6 million tonnes, the highest in many years. This was achieved due to an increase in acreage by 115 000 hectares and an increase in yield. In the Siberian harvest of 2022, the share of Altai Krai was 31%, the grain surplus of the region was 2.5 million tonnes. This season's grain exports in the region are estimated at more than 1 million tonnes, with a carryover of 1 300 000 tonnes.   

"With the current gigantic carryover balances, the issue of grain interventions remains crucial for farmers," Vladimir Pechyony, director of government relations at the United Grain Company, said about their volumes and progress. He stressed that "the Ministry of Agriculture has set a task to carry out grain interventions in 2022-2024 in the amount of 3 million tonnes of grain. More than 700 organizations were selected to participate in procurement tenders, and the procedure for selecting grain keepers was carried out separately. Out of the total volume of interventional purchases of 3 million tonnes of grain, the share of Altai Krai is 288 000 222 tonnes; in total, 1 200 000 tonnes of grain will be purchased in the intervention fund in the SFD. The payment of 41 billion roubles worth of purchased grain has almost been completed. This is a good help for agricultural producers."  

Vladimir Petrichenko, Director of the analytical company "ProZerno", shared his assessment of the final season's results. According to the expert, Russia's grain production in 2022 amounted, according to our calculations, to 153 832 000 tonnes. Wheat - 104 444 000 tonnes, including winter wheat – 74 million tonnes. At the same time, flour production has turned into a plus after a long decline.  

"In order for us to end the year with the reserves we started with, exports of wheat should be 55 million tonnes, of grain – 70 million tonnes. However, according to current forecasts, we will end the season with a carryover stock of 27 million tonnes of grain or higher. Taking into account 3 million tonnes of the available intervention fund, we have 24 million tonnes of grain on the free market.  

To intensify the export potential, the formula for calculating export duty rates should be modernised, e.g.: return to the formula used before 30 June 2022, or raise base prices by another notch – let's say 20 000 rubles for wheat, 18 500 rubles for corn and barley.... It is advisable to lower the coefficient from 0.7 to 0.5 or 0.3. Otherwise, if the current rules for calculating duty rates are maintained, the financial results of agricultural production will become worse and worse," Vladimir Petrichenko stressed. 

At the end of the XVI Winter Grain Conference, traditionally leading experts made their predictions of the future harvest.  Dmitry Rylko, Director General of the Institute of Agricultural Market Studies (IKAR), presented a forecast for the harvest season 2023-2024:   

"We live in an era when grain prices, i.e., wheat, corn, barley, are on a downward trend. The reasons are: the fight against inflation, the rising cost of money, the decline in effective demand from developing countries. As a result of a record wheat harvest in Russia and a large harvest in Australia, the seven largest exporters have more to export than in 2022.  Grain balances in Europe have also changed dramatically. Whereas in July the EU final inventory estimate for wheat was 11.6 million tonnes, in February it was already 15.3 million tonnes. These circumstances have become the lowering drivers in the current price situation. For grain, we still expect a gross output of 131.5 million tonnes in the 2023-2024 season, while for wheat we expect 86 million tonnes (the stress scenario is 80 million tonnes).  

Background information

The Winter Grain Conference is the largest expert platform beyond the Urals for developing strategies for Russian grain industry enterprises, making effective managerial decisions through high-quality business contacts, and exchanging up-to-date market information. 

158 companies from 20 regions of Russia and five foreign countries are taking part in the forum. The participants are Russia's largest grain-processing companies, agricultural producers, companies engaged in food processing equipment and services for the agro-industrial complex.