Miller Magazine Issue: 121 January 2020

51 COVER STORY MILLER / JANUARY 2020 of 4 pesos per US dollar, and replaced it with a 12% duty for corn, wheat, sorghum, sunseeds and barley. For soybeans, the export duty was increased to 30%, with further hikes to 15% and 33%. Such a change received a hostile reception by local farmers, who are pushed to change their structure of plantings. At the same time, such a change was positively received by competing countries, namely Ukrainian wheat and corn segments. At the same time, other countries consider relaxing duties to simplify the coverage by strategic commodi- ties. According to AgriCensus, the government of Turkey is considering cutting tax on imported wheat from 45% to 10-20% at the beginning of 2020 to cope with lower wheat crop in 2019. Currently, Turkish millers have to pay a 45% duty on imported wheat, if it is not going to be re-exported as a flour, otherwise, it is duty-free. On July 09, 2019, the Directorate General of Foreign Trade of India had allowed import of a total of 500 KMT of maize under the tariff rate quota at a re- duced import duty of 15% during 2019/20 (Apr-Mar). The government had pegged 2018/19 maize output at 27.2 MMT compared with 28.8 MMT in the previous year, while in- dustry players pegged the output at 22.1 MMT. # 5, 6: Currency fluctuations, VAT refund Currency fluctuations were no- ticed in many countries in 2019/20. In case we take into consideration Ukraine, over the past few years, with their low hryvnia exchange rate against the dollar, market par- ticipants have developed several habits: keep savings in dollars and purchase everything necessary in advance if possible. At the same time, both farmers and traders have become used to the fact that the tra- ditional strengthening of the hryvnia falls on the time of the field work. Some farmers with assets in dollars suffered significant losses due to the appreciation of the hryvnia in 2019. Via the exchange they received less money for sowing / harvesting. At the same time, the cost of sowing / harvesting remained at the same high level, as crop protectants sell- ers replenished the assortment at a high rate. This re- duced the profitability of production, which was already hampered by lower purchase prices for wheat / corn / barley this season compared to last year due to the high yield. At the same time, a higher yield of key crops compensated partially the loss of farmers. According to our estimates, the largest losses in profitability are so far observed for corn (due to low world prices in the begin- ning of the season), as well as for soybeans (due to low- er yields compared to last year and the cancellation of VAT refunds). In turn, the situation is better for sunflower seeds, wheat (especially feed, due to the limited number of its offers) and barley. A similar situation with the strengthening of the na- tional currency was in Russia. After such a decrease in profitability, farmers prefer to "sit" on stocks. Traders are forced to raise purchase prices in order to attract supply. BACHAR BOUBESS, THE MANAGING DIRECTOR OF MODERN MILLS OF LEBANON Supply of wheat and other commodities became scarce in Lebanon in autumn 2019 after two weeks of historic protests against the government. Banks were totally shut over safety concerns for a few weeks. Also banks were worried that depositors may take out their savings. This lead banks to change the payment procedure. In ac- cordance with new rules, in order to transfer money for the vessel of wheat, corn or other com- modity, Lebanese buyers were required to deposit their fresh money in their account in cash and only then the trans- fer could be done by the bank. In such a way, wheat reserves in Lebanon lowered to only three weeks coverage instead of three - four months normally. During about last two months, the pay- ments became slightly easier for wheat import: the banks require 15% of the payment to be cov- ered in USD by cheques/cash/ transfer outside of the country, while 85% of invoice could be covered by cheques/cash in Lebanese pounds, which will be con- verted to USD by the bank at the official exchange rate. For other commodities, payers still need to bring to the bank 100% of money deposit (cheques/ cash/transfer out- side of the country) in USD. But, there are rumors that soon, for wheat the cheques will not work, and only cash will be accept- ed. Additionally, banks stopped credit lines of all people, so ev- erybody can use only their own money. Bachar Boubess