The strong ruble hits the grain producers, and not only on him, complains the head of the Ministry of agriculture. Authorities have repeatedly said that too strong rouble not in interests of the budget and domestic exporters. However, upon closer examination, it appears that the complaint of the farmers is probably a good indication of the state of the industry and the economy as a whole.
“If there was the collapse and ruin, and the farmers were not circulating money, they would massively sold in 2016”
“We must export the excess to 40 million tons, but the ruble has strengthened and strengthened. This, of course, to our export positions – a serious drawback. Not only for agriculture but also for industry and other sectors of the economy”, – said Tkachev channel “Russia 24”.
“They (grain prices), unfortunately, fall, we got a lot of grain and counted on a major export,” the Minister added. “Dollar 57 (rubles) – it’s not a disaster, but it is a blow to our national economy,” the Minister said.
Authorities have repeatedly said that a stronger ruble is not happy neither the Federal budget nor exporters. Under exporting by default, meant primarily raw materials companies. Now, however, the situation with the ruble disturbs not only the budget and oil, but agricultural producers.
“According to the farmers, if the strengthening of the ruble will continue, the domestic market will fall sharply purchasing prices for grains and oilseeds. Today the buyers offer to the peasants six thousand roubles for ton of grain of the third class, whereas its real market value exceeds 10 thousand rubles. The collapse of prices will not only bring losses to agricultural enterprises, but also will lead to the fact that Russian grain traders will not be able in the current agricultural year to export the planned volumes of grain,” – said Oleg Yakushev of IR “ZERICH capital Management”.
Originally intended to export to the export of 38.5–39 million tons of grain, but the dollar needs in the coming months to stay at the level of 63-64 of the ruble, the expert adds. “If the strengthening of the Russian currency continues, exports will be below 4.5–5 million tons, then there will be the same as last, not the most productive of the year”, – said Yakushev.
However, the Director of the analytical center “Sovekon” Andrei Sizov, not inclined to dramatize the impact of the strong ruble on the grain market. “I believe that by the end of the year we will see record levels of grain exports, despite the strong ruble. Still, in the coming months, a likely weakening of the ruble”, – said Sizov.
He explains: grain exports is now roughly at the level of the previous two years. Another thing is that the grain harvest this season was 15 million tons (13%), and so exports would have to be higher. But the strong ruble – this is just one of the problems. World grain prices, denominated in dollars, remain at historically low levels. As the result we have a low domestic price for grain, which depends on export prices on the world market and ruble.
“In most cases, not the actions of the exporter are crucial for the rate of export of grain. The main landowner. In the port of Novorossiysk, the exporter sets the price, for example, on wheat of the fourth class – from 10 to 800 10 900 rubles per ton. And the farmer decides to sell or not. As practice shows this season, the farmer price is not very much, until the acute need for money there, so he sells grain to a relatively low rate,” – says Andrey Sizov.
But even more important is the balance of supply and demand. “We are at the end of last year talking to farmers to sell grain. Someone listened, but the majority – no. In the end, there is a risk of collapse in prices, because the farmer sat and waited for higher prices and not wait. Now the prices in the ports is not increased, but decreased, and time is running out, the farmer can not ever sit with this grain. After a month or two it will be necessary to Fund the field work, in four or five months to adopt a new crop, the money is needed, so farmers will have to start more actively to sell”, – says Andrey Sizov.
On the other hand, this situation indicates a relatively good financial condition of domestic agricultural producers. “If there was the collapse and ruin, and the farmers were not circulating money, they would massively sold in 2016. Prices have fallen and exports, respectively, has jumped. But, thank God, not so,” said the Director of “Sovekon”.
A much more negative impact, in his opinion, the strong ruble has on the farming and production of greenhouse vegetables. The expert gives a simple example: if the price of Russian tomato was 200 rubles, the import was worth three dollars, or the same 200 rubles. The Russian buyer did not care what tomato to buy. Now, with the strengthening of the ruble, the cost of imported tomatoes remained at the level of three dollars, but in rubles is already 180. While Russian tomatoes still cost 200 rubles, and the Russian buyer is now ruble vote for the imported product.
With farming the situation is similar. The meat is from abroad thanks to the strong ruble becomes cheaper in rubles and puts pressure on the value of the products manufactured in Russia. Of course, breeders are losing profits and hope to increase exports. Meanwhile, Russia’s meat just loses price competition in the global market.
With the budget and the oil workers too, the situation is ambiguous. Estimated, strengthening of the ruble to the dollar on one ruble budget loses an average of 30-35 billion rubles a month, said Eugene Korukhin from “ALOR Broker”. On the other hand, oil and gas revenues of the budget depend not only on the ruble, but also from oil prices, export duties, exports, etc.
The budget for 2017 tailored to the cost of oil $ 40 per barrel and the dollar to 67.5 rubles, i.e. the price of oil in rubles is 2700. “Now oil costs 56 dollars, the dollar – ruble 57.3. It turns out that oil in rubles worth 3209 rubles, or 500 rubles more expensive. With these parameters, the state budget loses nothing, but, on the contrary, receives further”, – said Dmitry Lukashov from IFC Markets.
Although in General for exporters, the strengthening of the ruble has a negative impact on profitability as the expenses, excluding interest, denominated revenues and foreign exchange. In 2016 the price of oil Urals went up by 26%, from 40 to 56 dollars per barrel and the ruble has strengthened by 15%, from 68 to 59 rubles per dollar. In such a situation, the revenue of Rosneft rose by 11%, to 3.5 trillion roubles, but in dollar terms it decreased by 22% to 53 billion dollars, EBITDA and cash flow in dollars has decreased significantly, by 18 and 57 percent, respectively, says Georgy Vashchenko of IR “freedom Finance”.
In any case, both for the economy and businesses and people the best is not the rise or fall of the ruble, and a stable exchange rate.