Drones also have their sights set on harvesting
Forecasts promise a great harvest for Russian grain growers this year. Harvesting and exporting the grain could be a challenge, all because of the war.
Author: Tatyana Rybakova
In Soviet times, there were many jokes about how even a good harvest could become a problem because it couldn't be harvested and stored. It seems time to remember those jokes: although the Ministry of Agriculture predicts Despite a bumper grain harvest (primarily wheat, the main export commodity of the Russian agricultural sector), farmers themselves doubt they will be able to cope with the harvest. The reason is the fuel crisis.
History repeats itself
Attacks by the Ukrainian Armed Forces on Russian oil refineries and fuel storage facilities have led to a fuel shortage currently estimated at 20% of demand. Authorities are actively redistributing fuel reserves—as well as predicted, primarily in the capital region, St. Petersburg, and the Leningrad region. The practice of refueling by license plates and Q-codes is becoming increasingly widespread in the regions, and import options are being actively sought. Consumers of high-octane gasoline are, of course, the hardest hit, but diesel is now also in short supply.
Russian refineries have traditionally had a high proportion of diesel fuel in their output, a result of both the refinery's design and the composition of Russian crude oil grades, which contain a high proportion of "heavy" fractions. Overall, Russia enjoys a surplus in diesel fuel production. estimated 40%. This surplus was exported: in many countries, diesel-powered vehicles constitute the bulk of the vehicle fleet.
The surplus began to decline with the onset of the war: army armored vehicles run primarily on diesel fuel. However, until recently, there was ample diesel fuel for export, the army, and agriculture, which before the war was one of Russia's largest consumers of diesel fuel.
The complete or partial shutdown of all ten of Russia's largest refineries, attacked by drones, led to a decline in not only gasoline production but also a dire shortage of diesel fuel for domestic needs. As a result, the government banned diesel fuel exports until the end of July - and there is no doubt that this ban will be extended at least until the end of the harvest campaign.
Moreover, Russia is starting import Diesel fuel, and the government is even willing to subsidize its import. Those who remember how the USSR imported wheat, one of the Russian Empire's main export commodities, paying for it with oil and gas revenues, are now experiencing a sense of déjà vu. Only now, it seems, Russia is willing to pay for petroleum product imports with wheat revenues. But will these revenues be enough?
Battle for the Harvest
Large grain farms typically purchase the diesel fuel they need for the harvest in advance. This is primarily because diesel prices traditionally rise on the wholesale market before the harvest. However, these purchases rarely cover their needs fully: no one can afford to maintain large fuel storage facilities. This year, however, purchases were made while fuel prices were already rising due to the oil refinery attacks, and not all farmers were able to allocate additional funds (farmers operate on credit, which they repay based on the sales of their produce). Some hoped that this "misunderstanding" would soon end and fuel prices would fall. They miscalculated, and now alarming news is increasingly coming from the field.
Among the first to sound the alarm were Irkutsk regionThe Buretskoye experimental production farm in the Usolsky district has suspended its sowing campaign due to a fuel shortage, said United Russia deputy Stepan Frantenko. "All attempts to negotiate with suppliers have yielded two answers: either they simply don't have [fuel], or they're tasked with delivering to western Russia. If we don't meet the quotas now, there will be no feed, no grain. We can simply avoid spending hundreds of millions and simply prepare for a complete shutdown of all agricultural production in the Irkutsk region," he said at a meeting of the Irkutsk Region Legislative Assembly Committee on Agriculture.
Then the baton was picked up by AltayIn the State Duma, Communist Party deputy Maria Prusakova from the Altai Krai stated that fuel shortages could lead to a food crisis. "Farmers in Rebrikhinsky and other districts of the Altai Krai are already facing fuel restrictions; gas stations are not selling diesel in canisters. People don't know how to mow their hay, and the harvest could be left in the fields," she said. affirm From the ground: in some areas they are already preparing to introduce a state of emergency.
The reason Siberians were the first to raise the alarm is simple. Firstly, Siberian farmers start purchasing fuel later than those in the southern and central regions of Russia, as their harvest season also begins later. Secondly, there are only three large oil refineries in all of Siberia: Omsk, Achinsk, and Angarsk. The Omsk oil refinery is already Suffered Due to the drone attack, the remaining two refineries, along with smaller ones, are unable to meet all demand. Furthermore, fuel from Siberia is now rumored to be being shipped not only to western regions, but also to southern regions, where the harvest is already in full swing. It's worth noting that high fuel prices are a factor for Siberian farmers. complained Even before the attacks on the refineries began. While the price of fuel was prohibitive for many back then, now we're talking about the possibility of crop failure and mass farm bankruptcy.
For south of Russia The situation is also difficult – farmers in the Rostov Region and Krasnodar Krai are having the worst time. Fuel problems are being reported in Volga and Stavropol regions.
Harvest campaigns have not yet begun in Central Russia, but if the fuel crisis is not resolved soon, complaints will come from these regions as well.
Small farms are hit the hardest: they typically lack sufficient funds or the ability to secure loans to purchase fuel in advance. And there's nowhere to store it. However, large agricultural holdings are also suffering: not only from fuel shortages and high prices, but also from problems with exports, which account for a significant portion of their income.
Grain not allowed to leave the country
Analysts reduce The grain export forecast is 13%–20% lower than last year's figures. The reason isn't just the harvesting problem, but also "logistical difficulties," as the Russian press has carefully put it. Or, to put it simply, Ukrainian drones have practically blocked Russian grain carriers in the Sea of Azov, where the main grain terminals are located. The Kerch Strait Officially open, but in reality, also under attack. Transferring grain to deep-water ports on the Black Sea is possible, but it's difficult, time-consuming, and quite expensive. Furthermore, there's no guarantee that grain carriers won't be attacked in the Black Sea.
As a result, the Ministry of Transport assures, which is ready to "reorient to other modes of transport" - apparently, the department's officials simply have no idea how many trains, not even cars, would be needed to replace just one grain ship. And the government thinks Regarding state support for war risk insurance, insurance companies are raising rates in line with the increased risks. And grain traders are preparing to the worst season in recent years; 25% of Russian grain exports go through the shallow-water ports of Azov.
Producers themselves are facing a double blow: on the one hand, rising fuel prices are driving up their production costs, while shortages are causing problems with harvesting, and difficulties with exports are eroding their profits.
How much does food cost for the people?
Farmers' problems will have a direct impact on Russian citizens. On the one hand, the inability to export will lead to a drop in domestic grain prices. But this doesn't mean that prices for bread and other foods will also fall. Purchase prices, which have little correlation with store prices, will fall. This isn't because resellers are greedy. They simply have a knack for forecasting: if farmers lose profits today, and many go bankrupt, then less wheat will be sown next year. Many farmers will switch to higher-margin crops—soybeans, for example, which are also used for biofuel. Consequently, grain prices could rise significantly as early as next year. Under these circumstances, it makes sense to hold onto some of the grain purchased today from desperate exporters to balance out next year's prices.
Meat and dairy producers—and livestock and poultry farming are the largest consumers of grain—are also good at calculating. Therefore, they, too, will raise prices for their products in advance. Add to this transportation costs, which account for a significant portion of food products, and you have a price hike. The extent of this hike will depend both on whether Ukrainian drones strike Russian oil refineries and on the actions of Russian officials.
Confusion instead of music
Nothing is known about the plans of the Ukrainian Armed Forces of Ukraine, but things are, unfortunately, not so good with Russian officials.
Attempts to fill the fuel deficit with imports, despite all the upbeat reports, are not going well so far. Belarus is unable to supply sufficient fuel, nor is Kazakhstan—the latter also supplies Central Asia, which is now also experiencing gasoline shortages. India, with the most significant potential for petroleum product exports, is not being particularly generous: although supplies from Indian refineries have begun, the three largest state-owned refineries refused Russian applicants, claiming they have no excess volumes for export. This creates an interesting situation: India buys Russian oil, refines it, and supplies petroleum products to Europe, but refuses to supply gasoline to the oil suppliers themselves. However, one of the largest Indian refineries is owned by Nayara Energy, 49% of which is owned by Rosneft, so it seems likely that fuel from there will still be exported to Russia.
However, this is if the US “hellish sanctions”, now named after the late Senator Lindsey Graham, do not interfere: the sanctions bill is already introduced The bill has been submitted to the Senate and is expected to be passed by August 1. If passed, the entire "shadow fleet" of Russian tankers will be at risk, and banks will be unlikely to dare conduct any transactions.
The situation with the redistribution of fuel on the domestic market is even worse. And this is not only due to the regional authorities норовит first of all, to provide for our own residents and services (and ourselves at the same time) - 3-5% of fuel, primarily diesel, goes to needs armies, which has already begun to complain about its shortage. And there's no doubt that the military's demands will take priority over the needs of farmers. Just as there's no doubt that the military's appetites will grow, even without the intensification of military operations or preparation for them: the military psychology is such that one should always ask for more than one demands. In a situation of shortage, this becomes entirely rational: it's better to stock up today than to run around tomorrow searching for what's missing.
What is the government doing under these circumstances? Deputy Prime Minister Alexander Novak, who oversees the oil sector, conducts meetings and gives instructions and promises to provide for everyone. And the Ministry of Agriculture reduces Loan preferences for farmers, making interest rates unaffordable for many. A very "timely" decision, as they say.
Meanwhile, the government needs to prioritize right now: exports or low domestic prices? On the one hand, exports mean foreign currency and good tax revenues for the budget. On the other hand, rising food prices are already posing a social threat. So far, the government's priorities are unclear to everyone, including farmers: promises to fix everything everywhere are uninspiring.
And while farmers complain and threaten to leave their harvest in the fields, traders fear for exports, and officials get away with fuss and promises, world wheat prices have plunged into growthRussia is one of the largest exporters of wheat. It appears that Russian wheat's problems are becoming a global problem.
