Miller Magazine Issue: 134 February 2021

54 INTERVIEW MILLER / february 2021 this season. Why? Because they will lose the incentive to store that grain until the new season. Just let me explain: when those first taxes were introduced, we substantially lowered our forecast for wheat exports from 40.9 to 36.3, more than 10%. Because we understood and we analyzed those similar scenarios in the past that farmers would prefer to store their grain until the new season without the tax. And the new season starts in July. But as there was a very good chance that floating tax will be approved. They will lose that incentive to store that wheat until the new season and sell it in the current season. That will drive the domestic market lower and will boost Russian with exports. So, we were expecting those floating tax news and that's why we upped our export forecast from 36.3 to 37.8 million tons. Actually, it's bearish news for this season, but you know, it's not a game-changer, just a few million tons. I think more importantly what effect it will have on the new crop, 2021? We believe that if floating tax is approved, new crops could suffer. Because many farmers would prefer to plant something else, not wheat this spring because of those restrictions. Our most recent forecast for wheat crop and Russia this year is 77.7 million tons. It's already substan- tially below the previous year, but not because of the results of those restrictions but because of the weather. If the new floating tax is approved, I think we could produce 1.5 to 2 million less from that number, which is low already. And I think that would have a bullish ef- fect on new crop first of all. There's a very huge, big question mark over the 2022 crop and autumn planting campaign this year. I think because it's not affecting the next crop because Russia and Ukraine mainly produce winter wheat. (It's around 60 70% in Ukraine). It has already been planted last au- tumn. But we have a question about that spring crop this year. And there's a very big question about the next crop in the next year. And we'll have an answer to that this autumn, but I'm afraid we could see a substantial decrease in the planting area of winter wheat this autumn, and that is likely to imply a substantially lower crop in 2022. Russian wheat farmers complain about the taxes. How they will react? Do expect any strike? Farmers are obviously angry. At this stage, I think the majority of them haven't understood what has happened. At this stage, their reaction is somewhat muted, because I think the majority hasn't under- stood what has happened. But so sooner or later, they will understand what is happening. Many of them are losing not 1 to 5% of their revenue, many of them are losing like 10%, 20%, or even 30% of their revenue because of those economic restrictions. I haven't seen anything like that and actually, it's not happening anywhere except Ar- gentina and such big transfers from farmers' pocket to government and consumers. But strikes…farm- ers driving tractors to Kremlin... No, I don't think it's going to happen at least soon. I think the reaction will be kind of silent. Probably we'll see a few louds to the government. The issue is a very serious issue for producers here, for crop growing farmers here. There is no proper lobby to pro- tect the interests inside the country. Sugar guys have a good lobby, livestock guys are very influential. And livestock sec- tor was the driving force behind that decision to limit ex- ports. Vegetables also have a strong lobby, but not crops. Crop producers are unconsolidated, there is no good lobby. And that's why it's one of the reasons why such things can happen. So strikes? No. They will react silently but they will start to cut the areas under wheat and try to switch to other crops. At the same time, the current environment is so toxic for farmers. It's not easy to switch to anything else. Because it's not only wheat, as I mentioned, it's also corn and barley. There are also exports restrictions on oilseeds. And they're also regulation of sugar market. So in many cases, it's very hard to choose where you are going to switch to from your wheat because everything now is being regulated. But if I were a farmer and actually we are advising our Russian clients to switch -at least for the next crop- from grains, Wheat productıon, MMT 2000 34,5 2001 47,0 2002 50,6 2003 34,1 2004 45,4 2005 47,6 2006 44,9 2007 49,4 2008 63,8 2009 61,7 2010 41,6 2011 56,3 2012 37,8 2013 52,1 2014 59,7 2015 61,8 2016 73,4 2017 86,0 2018 72,1 2019 74,5 2020 85,9 *2021 77,7 Source: Rosstat, Sovecon *2021- Sovecon forecast Wheat export, MMT 2000/01 0,4 2001/02 3,5 2002/03 13,3 2003/04 3,7 2004/05 7,7 2005/06 10,3 2006/07 10,5 2007/08 11,6 2008/09 18,0 2009/10 18,2 2010/11 3,4 2011/12 21,6 2012/13 11,2 2013/14 18,3 2014/15 22,0 2015/16 25,6 2016/17 27,8 2017/18 40,9 2018/19 35,3 2019/20 34,9 *2020/21 37,9 Source: Customs, Sovecon *2020/21-Sovecon forecast