In the world markets there is the overall drop in prices of cereals: wheat in London fell by 1.5%, and in Paris - by 1.8%. In the U.S., the quotes fell by 2.1% in Chicago and by 2% in Kansas City. The corn prices dropped, losing 1.7%. There is a 2.1% fall in the price of soybeans. However, the news from the Russian fields are not encouraging: farmers have already lost about 1 billion because of the drought, but the losses could be greater if the situation does not get better soon.
According to the data of the Ministry of Agriculture, represented to Prime Minister Dmitry Medvedev, the agricultural department considers only three scenarios: average, bad or very bad. The harvest of 2012 is not promised to be brilliant, at first, we talked about 90 million tons, then about 85. Now the Ministry of Agriculture speaks to the premiere on "the gross harvest of grain crops ... expected to reach 80 million tons," but if the droughts will continue, it will be possible to collect only 75 million, or even less. At the "Grain Forum-2012 in Siberia," which has recently taken place in Novosibirsk, the Deputy Minister of Agriculture Alexander Chernogorov has announced a figure of 70 million tons. "There are such trends", - the official said, assuming that grain exports this year may reach around 12 million tons.
According to the ministry, as compared with last year, grain production may be reduced, at best, by 11%, at worst, in the adverse weather conditions, by 25.6%. There are grain reserves in the farms and grain elevators; there are about 17 million tons, but, according to preliminary data, about 5 million tons are the grain harvest of this year. As a result, the balance may get very bad: 70 million tons of crops and about 10 million tons of reserves make a total of about 80 million tons with an average domestic consumption of around 70 million tons over the past few years. There is some grain for exports, but, recalling the experience of the drought in 2010, at critical moments the government prefers not to take risks and to strictly limit the export.
The measures to combat drought and its consequences offered to the government by the officials of the Ministry of Agriculture can be interpreted in favor of the version of a possible embargo. In order to prevent the extreme growth of the price of grain and feed in areas affected by drought, the state can carry out local commodity interventions using its reserves of up to 500 thousand tons. But if the state has to carry out large-scale grain interventions across the country to maintain control over prices (this possibility is also considered), it will not be possible to avoid the embargo.
The price forecasts are not encouraging: for example, the farmers of Stavropol collected only about half of last year's grain harvest - 4.2 million tons because of the drought. According to Deputy Prime Minister of the regional government Nikolay Velikdan, "The bread of Stavropol was, for farmers, bitter and hard this year". At the same time, the official noted that Stavropol will not suffer from the deficit in the bread; grain enough to supply the population. But the residents will have to put up with high prices: the prices of bakery and confectionery products in the region will rise by 2-3 rubles this fall, and the authorities will constrain only the price of the white pan bread.
While the Stavropol officials are contemplating, in the Kuban the largest bakeries of the holding "Kuban Loaf" in Krasnodar increased the selling price from 14 to 17 rubles for one loaf in August. Given a fixed trading margin of 10% the price of one loaf in the stores has increased by more than one third to 18.7 rubles.
The situation with the export is also deplorable: the regions of the North Caucasian Federal District will try to fulfill their obligations, in particular they signed contracts to supply grain to Turkey and Azerbaijan. But the extent to which they will do it is still not clear: last year, the exports to these countries amounted to about 2.5 million tons, while now the exports is estimated at only about 200 thousand tons.
In general, if Russia has the worst harvest in the 2012-13 season, its supply to the world market may decrease by about 15 million tons of grain. As you know, the last marketing year was a record for Russia in terms of grain exports. This year, last year's record volume of approximately 27 million tons cannot be reached, all Russian experts agree. Moreover, even the export of 10 million tons is questionable.
If Russia does not impose a ban on exports, a desperate struggle for grain between exporters and domestic consumers of grain will break out in the grain market. It is still a big question if the Russian consumers that compete with the world demand for grain will withstand this competition. If the Russian grain processing and animal husbandry buy grain at world prices, food prices will increase drastically.
News about upcoming problems with the harvest, the heat and fires in Siberia, as well as the expectations of a new wave of the crisis is already affecting consumers’ behavior. According to the research of the consumer market, in July, the population showed an abnormal demand for flour. The demand for it compared to July 2011 has increased immediately by 8.2%. The demand for rice and buckwheat groats has also significantly increased - by 2.1 and 1.2% respectively. As the researchers have noticed, the demand for other commodity groups is within the "normal" seasonal trend.
"The peculiarity of the Russian food market is that demand growth will influence the prices. People with low incomes are trying to invest in something tangible and necessary. Flour for them is a perfect object for investment, because its price will definitely rise" - Oleg Klepikov, CEO of inFOLIO Research Group, comments on the results of the research.
People began to purposely make stocks. And we are talking not about just the older generation, but also about the people of middle age. Indeed, in addition to future bad harvests, the growth in demand is caused by circulating rumors about the sharp deepening of the crisis in September. In addition, everyone remembers the drought of 2010 and the subsequent rise in prices of all food commodities.
