Russian Agriculture News

Stronger and bigger: Europeans are addicted to Russian alcohol

Millions of decalitres

Last year, Russia sold almost three million decaliters of strong alcohol worth $195 million, 20 percent more than in 2020, according to Agroexport under the Ministry of Agriculture.

Traditionally, the lion's share of exports is vodka ($160 million). Producers won back the fall due to the pandemic: according to the Federal Customs Service, in 2020, supplies decreased by seven percent.

"Perhaps, the growth is additionally caused by the fact that British and Swedish brands have risen in price more than Russian ones," says Sergey Chernikov, Associate Professor at the Faculty of Economics of RUDN University.

Russian whiskey, cognac, brandy were also in demand. The export of gin and juniper liqueurs increased two and a half times, to almost three million dollars.

Domestic strong alcohol was sent to 75 countries. Most of all - in Europe. Thus, deliveries to Latvia increased by 51 percent in physical terms. In Germany - a quarter. In addition, Ukraine and Kazakhstan are among the main importers.

Significantly increased sales to China (66 percent), Azerbaijan and Hungary (62 percent), Georgia (32 percent), Vietnam (three times), Uzbekistan (2.7 times).

This is primarily a result of the loosening of covid restrictions. Tourists have returned to the countries of the former USSR, where there has always been a high demand for Russian alcohol.

“The restaurant sector is also recovering. In general, growth is noticeable, but they have not yet returned to the pre-Covid level,” Sergey Chernikov notes.

In 2020, the global spirits market shrank by 8.7 percent, according to research firm Euromonitor International. In 2021, plus three percent. According to analysts, the indicators will exceed pre-Covid values ​​only in 2023.

On the stock exchanges, so-called sinful shares are distinguished - dubious for investors. These are securities of producers of alcohol, tobacco products, the gambling industry. Some consider them beneficial. Others avoid it for ethical reasons.

"But, as practice shows, the more difficult the political situation in the world, the more alcohol they buy," financial analyst Andrey Plotnikov points out. For example, the shares of the LVMH holding, which owns, in addition to Louis Vuitton, such brands as Hennessy (cognac) and Moët (champagne), since 2008 brought investors 1,300 percent in profit over 13 years.

"The consumption of strong alcohol this year will grow by eight percent. Accordingly, domestic exports will add another three or four," RIA Novosti's interlocutor predicts.

With vodka around the world

Russia is not a leader in this market at all. Although brands that are perceived as Russian are popular in the world.

For example, "Russian Standard", which began its international expansion twenty years ago, is now represented in 86 countries. The Beluga Group is not far behind. According to the target operating indicators, in two years the share of the holding's exports should increase to 13 percent against nine in 2020.

"Competent promotion of domestic brands, their participation in international exhibitions and events will further increase the supply of Russian vodka," believes Igor Veretennikov, an expert at the investment consulting company DoFin.ru.

The Union of Producers of Alcoholic Products estimates the export potential of forty-degree alcohol at half a billion dollars. It is expected that the positive dynamics will continue in all categories.

The world vodka market has a peculiarity - ten "drinking countries", the main consumers. In monetary terms, the United States is in first place - 39 percent (Russia - 24, Poland - 11). In natural terms, Russia is the leader (145 million decalitres, the United States has 40 million).

Approximately 20 percent of the forty-degree alcohol produced in the world is consumed in Ukraine, Belarus, Kazakhstan, Germany, England, Romania and Uzbekistan. Moreover, five of the ten "drinking countries" are former Soviet republics.

According to experts, this list is unlikely to change in the coming years. Cultural traditions, including alcohol consumption, change very slowly.

Prices are different. Analysts predict a rise in price of strong drinks in the Russian market. Since February 6, the minimum cost of domestically produced alcohol has already been increased: half a liter of vodka - 261 rubles instead of 243 rubles, cognac - 480 (was 446).

In fact, companies have been rewriting price tags since November. They explained it by increased costs for bottles, labels and logistics. Vodka is cheaper than 300, and cognac - 600 is not found in stores.

Analysts warn that the trend will continue. But the more expensive the product, the harder it is to sell. There will be more willing to produce illegal, cheaper. By the way, the demand for such products is increasing. More than a quarter of strong alcohol in the country is counterfeit, according to the Higher School of Economics.

Therefore, as analysts and market players themselves note, the state should carefully control all production.

miketheterrible wrote:

kvs wrote:This Dutch seeds issue looks like a Yeltsin legacy.   It needs to be rectified ASAP.

It will. People underestimated Russia for so much and import substitution has done absolute wonders. Doesn't mean it stops because of sanctions. On the contrary, it further drives more import substitution.

Food becomes the weapon of the West, by Olga Samofalova for VZGLYAD. March 23, 2022.

Russia and Ukraine account for almost a third of world wheat exports. Western countries are warning about the coming colossal shortage of grain and an even greater rise in prices. Will the main buyers - the countries of North Africa and the Middle East - be able to find an alternative to Russian wheat? And why do large Western agricultural companies stay in Russia?

American farmers are concerned about the unprecedented drought in the south of the country, in particular, in Kansas. This will deal a serious blow to the grain harvest. Weather is a traditional factor that is beyond human control and makes adjustments to the grain harvest. However, this year the drought in the US is far from the main factor for the formation of shortages and rising prices for grains and wheat. The situation in Ukraine and the Western sanctions strikes against Russia pose even more threats to the established order in the global grain market. The markets for the US and Russian-Ukrainian suppliers are different. However, the reduction of supply in several regions at once promises much more negative consequences for the world.

The European Union and Greece should prepare for a shortage of grain in the market, Greek First Deputy Foreign Minister Miltiadis Varvitsiotis said on Tuesday. Cereal prices have already risen in Europe. The shortage will mean significant price increases and unrest in the wider region, especially in North Africa and the Middle East, the Greek minister said.

Russia is on the list of the world's largest grain suppliers, and sanctions in this area will lead to “deficit and price increases and will especially hit the poorest countries,” emphasizes the Eastern Committee of the German Economy, which brings together German companies in Eastern Europe and the CIS. They believe that sanctions should not lead to the complete destruction of the Russian economy and the impoverishment of the population. Because a complete rupture of European-Russian economic ties is completely counterproductive for the peaceful future of Europe.

French Foreign Minister Jean-Yves Le Drian demanded to deal with the problem of food security. According to him, the scale of grain production in Ukraine and Russia is known, and the consequences in Ukraine are already visible: the impossibility of harvesting, sowing and exporting. The situation in Ukraine could provoke a global food crisis as early as 2022, French Minister of Agriculture and Food Julien Denormandie told Le Figaro.

Russia and Ukraine together provide about 26% of world wheat exports. Russia accounts for 16% of world exports, Ukraine for 10%

(data from the USDA). For many years, Russia has been moving towards regaining its leadership in wheat exports. And she achieved this by 2018, seriously increasing her market share and overtaking both the United States and the European Union in this indicator.

The situation in Ukraine and the sanctions strike by the West on Russia may lead to a reduction in wheat exports from Russia and a reduction in the harvest in Ukraine. Deliveries of Ukrainian grain through the Sea of ​​Azov have already been stopped. The Black Sea ports continue to operate, although not at full capacity. Therefore, Russia continues to export. In March, it can export more than 2 million tons of wheat, subject to good weather, Dmitry Rylko, general director of the Institute for Agricultural Market Studies (IKAR), predicts. This will be a good result if the problems with logistics and payment due to sanctions do not make their own adjustments. Egypt and Turkey, as the main buyers of Russian wheat, are trying to import as much grain from Russia as possible this month.

The main buyers of inexpensive Black Sea wheat are African and Asian importers. Thus, Qatar, Rwanda, Kyrgyzstan, Egypt depend on 80% of wheat supplies from Russia, and Turkey depends on 70%.

If, for one reason or another, grain exports from Russia stop or are limited, then these countries will have to look for alternative suppliers. The West will probably not dare directly to ban wheat exports from Russia. But it doesn't have to be to hurt. The US can threaten sanctions against ships that call at Russian ports or deal with "toxic" Russian goods. And this will immediately make it difficult to export grain from Russia. Another option is that Russia itself could ban grain exports as a retaliatory measure or to ensure its own food security against the backdrop of price chaos and shortages in world markets.

Either scenario will lead to a shortage and an even more serious increase in wheat prices, which already reached a 14-year high in the first week of Russia's special operation in Ukraine.

Will buyers from Africa and Asia be able to find an alternative to Russian and Ukrainian wheat? In addition to Russia and Ukraine, which account for 26% of world wheat exports, there is also the EU, which occupies 18% of the market, Australia - 13%, USA - 11%, India - 5%. In the EU, they have already started talking about the need to sow all available unused fields, but they are talking about fodder crops - soybeans and corn, which should be fed to livestock. The US will have problems with the wheat harvest due to drought. The local Department of Agriculture says US farmers will grow only slightly more wheat this year than they did last year.

Australia is trying to produce and export more, but has not yet been able to move up significantly. There is also talk of a modest increase in exports, if it happens at all. India itself consumes a lot of wheat, but has recently begun to export it in small quantities. This country may well take advantage of high wheat prices and increase its exports. Alternative suppliers are located in more remote regions (USA, Australia, India), which will, of course, make the delivery of goods more expensive.

In any case, no other producer is able to completely replace the Ukrainian and Russian volumes of wheat so quickly. Therefore, a fierce price struggle will begin for scarce expensive wheat. The "extra" wheat will go to those countries that can pay a higher price for it. In an unequal struggle, the richer developed countries will win, and the poorest will lose, where the proportion of hungry will inevitably continue to grow. Food products have already become more expensive than ever, and the withdrawal of Russian and Ukrainian wheat from the market will make bread and flour more expensive.

Rising food, fertilizer and energy prices as a result of the situation in Ukraine threaten to cause a global food crisis, said UN Secretary General António Guterres. “The effects are already being felt around the world with soaring food, energy and fertilizer prices. This threatens to turn into a global famine,” he said. According to him, it is necessary to "stop hostilities and give peace a chance."

Unlike a number of Western companies, such as Ikea, McDonald's, the largest agricultural companies are not fleeing Russia. For example, Cargill, Bayer and Archer Daniels Midland (ADM) have ignored calls to cut ties with Russia and continue to sell seeds and farm crops in Russia. Because they understand that we are talking about the availability of food both for the Russians themselves and for residents of other countries.

So, last week, some Ukrainian and American organizations in the field of ecology and agriculture wrote a letter demanding that Cargill completely leave Russia, WSJ notes. This company has been operating in our country since 1964. She runs local livestock feed and grain factories – and has refused to shut them down. “Food is a basic need, it should never be used as a weapon,” retorted Cargill, which back in the 1990s bought the Efremovsky glucose-treacle plant in the Tula region, then built an oil extraction plant in the Volgograd region , an elevator in the Voronezh region and more.

The German company Bayer also said that food restrictions would only increase the loss of life. Therefore, the company has already supplied Russian farmers with both seeds and pesticides needed for crops. Another producer of pesticides and seed grains, Syngenta, is also continuing to supply seeds and chemicals to Russian farmers to alleviate the global food crisis. Her business in Russia and Ukraine is estimated at one billion dollars. ADM, Bunge and Viterra will also continue to operate in Russia, as will the grain division of commodity giant Glencore. But they will restrict some operations and expansion. ADM, along with Bunge, Cargill and Louis Dreyfus, is one of the world's top four agricultural commodity traders. ADM is a traditional American agro-industrial company, which operates in many emerging markets, including Russia. In 2018, ADM bought out 50% of the division for the production of starches and syrups from the Rostov holding Aston for 3 billion rubles.

Back in 2004-2005, the American company Bunge acquired elevators in the Krasnodar Territory and the Voronezh Region and a grain terminal in Rostov-on-Don. In 2008, the company commissioned an oil extraction plant in the Voronezh region, where it produces the well-known sunflower oil of the Oleina and Ideal brands.

The fact that Russian wheat exports continue now also indicates that international traders have decided not to exacerbate food problems in the world.

The UN Food and Agriculture Organization estimated that about 13 million people would be on the verge of starvation due to rising food prices and supply disruptions. It will not be Western countries that impose sanctions that will suffer in the first place, but low-income countries. There are fears that a coming food crisis could lead to food riots.

The surge raised concerns about food security and brings back memories more than a decade ago, when price spikes led to food riots in more than 30 countries, including Africa and the Middle East.

https://vz.ru/economy/2022/3/23/1149890.html