Ukraine War Day #328: Boy Meets Tractor

Dear Readers:

In today’s issue of Pravda, we are going to talk about — what else? — the HARVEST! [little Soviet joke there]. I mean, war is war, but you still gotta eat, right?

So, I have this piece by reporter Olga Samofalova, she covers the Economics beat, and looks to be a perky redhead. The headline reads:

It Is Profitable For Russia To Feed The World

The lede paragraph:

Russia is laying a new historical record for the harvest of grains and wheat. Such harvests have never seen before, not even in Soviet times, when huge swaths of land were under seed. With every year that goes by, Russia increases its world leadership in the export of wheat. While, at the same time, the USA which used to be the leader, is losing its position. In 2022 the Americans sold the least amount of wheat ever in the past 40 years.

Reporter Olga Samofalova

To reiterate: This year’s harvest in Russia is up by 26.7% and is breaking all records, from both Soviet and post-Soviet times. The amount is 153.83 million tons. For wheat alone, the number is 104.44 million tons. That’s a lot of wheat. By comparison, the number for 2021 was 75.94 million tons.

[The fact that Russia is now surpassing the Soviet harvests is all the more significant when you recall that the Russian Federation is not nearly as large as the Soviet Union was, nor does it have as much grain-producing area.]

The other big news being that the Russians are winning hands-down against the Americans (who used to be the breadbox of the whole world), and who had a somewhat pathetic harvest this year. Not that it is completely their fault: America has suffered from drought two years in a row. That happens sometimes. American wheat is also pricier and can’t compete with cheaper wheat of equal quality.

“A tractor in the field is like a tank in the battle!”

Russia is proving that it can feed the rest of the world, while earning nice profits for itself. During the past 10 years the agrarian export exceeded $37 billion dollars. Russia’s share in the global export of wheat consists of 16%.

There are several factors for Russia’s good showing, including outstandingly good weather. But even more importantly, modern technology, which has allowed productivity to increase so much as to more than compensate for the loss of grain-producing regions, after the break-up of the USSR. Technological improvements are particularly noticeable in reducing losses and wastage that might occur during the collection of the harvest. Russia is also using more productive species of seeds, in the main imported varieties. [yalensis: I hope they are not GMO’s, but maybe they are…]

Another factor in increasing export, is the reduction in domestic consumption. In the USSR, up to 70% of the grain produced was used to feed domestic herds, for the production of meat and milk. Whereas in contemporary Russia we have seen a 6-fold reduction in the overall herd of horned cattle, compared with Soviet times: Namely, 41.5 millions of heads of cattle in 1991, compared to 7.2 million heads in 2020. Correspondingly, there is that much more grain to sell abroad.

Russian farmers themselves are very motivated to sell their grain abroad. Once the domestic market is satisfied, there are good profits to be made abroad. World grain prices are high, but at a stable level. Russian grain is popular in the nations of the Middle East, Africa and Asia [yalensis: in other words, the civilized world – haha!], a total of 126 countries who are stable and reliable customers.

The shares of exported grain are as follows: 39% goes to the Middle East, 31% to Asian countries, 20% to Africa, and 7% to the EU. Grain exports have also risen to former Soviet countries such as Belorussia, Kazakhstan, Kirgizia and Armenia.

Is there a down side to such good news? Yes. Neighboring Kazakhstan also had a great harvest this year, and the worry is that the abundance of grain on the world market might bring the prices down too much. Which could cut into the profits of the Russian farmers.

To date, Russian grain has not fallen into Western sanctions, at least nor formally. Although there is still some bickering going on about payments in currency vs rubles, that sort of thing. There are also issues with finding insurers, not to mention some logistical issues. But notwithstanding these annoyances, Russian grain continues to conquer the world market.