Miller Magazine Issue: 143 November 2021

73 INTERVIEW MILLER / november 2021 Sizov expects wheat prices at least 320-$330 per tonne. “We could see prices rallying to as high as $350 per tonne,” he adds. Mr. Sizov, in your article published in Financial Times on 26th September, you said the Russian gov- ernment's move to tax grain exports could harm its leading position in the grain market. What are the rea- sons for this warning? What signs do you see in this regard? The answer to the first question is relatively simple. We have a very unfavorable setup for farmers currently. The grain prices are being regulated, there is a threshold. It's $200 per tonne for wheat. For barley and corn, it's $185 per tonne. And everything above is being taxed at 70%. So for example, if the FOB price is at $300 per tonne, -like it is now roughly-, it implies that around $70 will be taken out of the farmer's pocket. So, it also implies that farmers receive only 30% of price increase in the glob- al market. So grain prices and also oilseed prices have been regulated heavily (Sunflowers, second cash crop are taxed at 50%!). There is a cap and all major crops’ prices have been regulated. At the same time, input pric- es are not being regulated. As we see all over the world, fertilizer prices, chemicals and machinery prices…all agri- cultural inputs are going up and up. Fertilizer prices more than doubled already. This implies that costs are rising fast, but at the same time prices for crops have been more or less fixed. So that's why we expect to see -and I think it's happening already- a fast decrease of margins for Russian farmers. And as a result, it will inevitably lead sooner or later to a decrease in production or to switch- ing towards a crop slide or in some cases they will just cut planted area. SUBSTANTIAL DECREASE IN WHEAT AREA As per your second question, what are the indicators? What can we say now? We have relatively modest wheat crop this year. Our most recent estimate is 75.5 million tonnes, which is roughly 10 million tonnes below the previous year. This is already below-average crop for recent years. The biggest reason no doubt is unfavor- able weather in the summer, and even in spring in some places, and that held yield substantially because of lack of moisture. At the same time, we feel that some farmers started to cut ag input applications already this year for this 2021 crop. And that's why yields suffer more than they should. So weather accounts for 80-90% of this decrease but the rest accounts for those problems because of the taxes. And also we see right now that, we just issued an alert, we expect a substantial decrease around 1 million hect- ares decrease of winter wheat, roughly -5% of the previ- ous year. It's based on two factors. One, the weather was very dry, especially in the Volga Valley. Some farmers preferred not to seed anything, afraid that plants won't grow and develop before the winter. But also, I think many of them in the Volga Valley, in parts of the center probably, decided to cut the area because of the taxes because for some of them, margins are already falling