Speaking of export duties: an economist from the Southern Federal University explained why Russia is limiting the export of grain

The export duty on wheat from the Russian Federation has decreased to 4,727 rubles per ton since May 17, compared to 5,279 rubles per ton a week earlier — the rate has decreased for the sixth week in a row. Doctor of Economic Sciences of the Southern Federal University Oleg Sviridov believes that the Russian state is thus making a compromise with grain producers.

The grain damper mechanism, which provides for floating duties on the export of wheat, corn and barley, has been in effect in the Russian Federation since June 2, 2021. Professor of the Department of Finance and Credit of the Faculty of Economics of Southern Federal University Oleg Sviridov shared that the duty was introduced to prevent the rise in prices for bread and pasta within Russia.

“Customs is a protectionist, its function is to limit or stimulate the import and export of goods from the country. For this purpose, customs duties are used: incentive, neutral and protective. Two years ago, a situation arose when it became much more profitable for farmers to sell wheat abroad than on the domestic market. They began to “drive” all the grain abroad, and a bread shortage was brewing in Russia. In order to stabilize the market, Russia introduced export duties,” noted Oleg Sviridov.

Oleg Sviridov, professor of the Faculty of Economics of Southern Federal University. Oleg Sviridov, professor of the Faculty of Economics of Southern Federal University.

As a result, the following situation has developed on the market: the cost of growing a ton of grain in the south of Russia is approximately 9–10 thousand rubles, while they are willing to buy it abroad at a price of 15–16 thousand. The state collects an export duty in the amount of 70% of the difference between the base and indicative prices — approximately 5 thousand rubles, and as a result, the agricultural entrepreneur receives 1-2 thousand rubles from each ton of grain. But this is the ideal case; in practice, everything can be very different.

“Government regulation of the economy can be justified, useful and reasonable. As a result of any government intervention in market mechanisms, there will always be victims. In the situation with export duties, grain producers suffer because either their production costs are higher than average, or their wheat is cheaper. For example, in the south of the Rostov region, the climate is becoming arid, fields are becoming less fertile and, at the same cost, farmers are harvesting fewer tons of grain. And in the north of the Rostov region, smaller grains are formed in the ears, which cost about 14 thousand rubles on the world market; it turns out that with the same duty they go to zero,” explained Oleg Sviridov.

The economist added that this is why the duty rate continues to fluctuate, and it decreases every month — the state is looking for a middle ground . The Ministry of Agriculture does not have the goal of ruining grain producers, says Oleg Sviridov, only “cutting off” the excess income that they receive as a monopoly in this market. Leaving all the wheat grain inside Russia, according to the professor, is also not in the country’s interests — we do not have enough production capacity to process it.

“We definitely need to build more flour mills and pasta factories, and trade finished products with the world, but so far Russia has not made a significant breakthrough in this direction, we need to sell grain as raw materials. If Russia suddenly abruptly stopped all wheat exports, bread prices would simply rise in Europe, but real famine would begin in African countries,” emphasized Oleg Sviridov.

He also said that all the money that the state collects in the form of duties is returned to agriculture in the form of subsidies . However, duties are collected only from contracts for the sale of wheat, barley and corn, and subsidies are distributed among all sectors of agriculture: livestock breeding, vegetable growing and others.

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