Denis Ternovsky, expert of the Economic Policy Foundation at the Gaidar Institute, explained in a commentary to Nezavisimaya Gazeta how a downward revision of grain export forecasts could affect domestic prices and farmers' investment in the future harvest.
On Monday, Russian and international analysts revised their grain export forecasts downward. Difficulties surrounding shipments via Black Sea ports, which play a key role in exporting the country's agricultural produce, remain one of the main reasons. However, experts raised their estimates for rolling reserves of the grain remaining unsold at the end of the season.
For agricultural producers, the situation means not only a decline in sales revenue but also the need to reconsider expenditures for future harvests. As Denis Ternovsky explained, if purchase prices fall below the cost of production, farms have less capacity to invest in their operations.
"Surplus stocks are putting downward pressure on domestic prices, pushing them below the cost of production. This diminishes the incentive to invest in the next harvest, from a reduction in planted acreage to a decrease in the use of fertilizers," the economist added.
Consequently, persistent export challenges could impact the grain-growing process: farmers may reduce plantings and cut down on fertilizer application. This creates a risk that difficulties encountered in selling the current harvest will also negatively affect production volumes in the coming season.