The country says its proposal to lower volatility has support from other countries and businesses and is gaining traction
MOSCOW, Russia (Reuters) — A Russian idea backed by President Vladimir Putin for a BRICS grain exchange that would allow buyers to purchase directly from producers is gaining traction ahead of a summit of the group in October, the head of the Russian Union of Grain Exporters said.
China and India are the world’s biggest wheat producers and Russia the biggest exporter of the grain, so any exchange based on the BRICS grouping of Brazil, Russia, India, China and South Africa, as well as Egypt, Ethiopia, Iran and United Arab Emirates, would have global clout.
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Eduard Zernin, head of the Russian Union of Grain Exporters (Rusgrain), said he hoped organizational issues regarding the exchange would be resolved by this year’s planned BRICS summit in Kazan, Russia.
Zernin said the idea had support from other countries and businesses in a number of countries.
“We have seen understanding and support for the initiative,” he said.
“Interest in our initiative is quite high.”
Zernin said the main problem with traditional commodity exchanges was that they were beholden to “speculators,” including hedge funds that trade derivatives of the commodity. This had led to prices below the cost of production, he added.
“We believe it is in the interest of both suppliers and buyers of real grain to eliminate such extreme volatility and add transparency and predictability to the world grain market.”
“We use the term “exchange” rather for reference. Ideally, we should be talking about a modern, high-tech digital marketplace,” Zernin said.
It was not immediately clear why big buyers such as Egypt and China would use a BRICS exchange, considering they are currently able to choose the lowest available price from a wider range of sellers that might include Ukraine or the European Union.
Rusgrain floated the idea of a BRICS grain exchange in December, and it gained the support of Putin in early March.
Zernin said non-BRICS countries would also have access to the exchange, which he said was “not against the dollar.”
“BRICS countries are the largest exporters of wheat, rice and corn,” he said.
“Equally important is our contribution to the supply of pulses to the world market.
“We do not insist on the exclusion of the dollar from grain settlements, but free conversion of the exchange’s clearing currency into rubles is critical for us.”
Russian grain exports are projected to reach 65 million tonnes in 2023-24, compared with 60 million tonnes in the previous marketing season. Russia does not publish official export statistics.
IKAR analysts predict wheat exports of about 52 million tonnes this season and SovEcon 48.6 million tonnes.
“So far, grain exports are progressing at a good pace, despite problems with settlements, insurance and trade financing,” Zernin said.
About 47 million tonnes of grain have been exported from Russia, he added, including about 36 million tonnes of wheat.
Russia’s main grain markets are Turkey, Egypt and Iran, but it has also boosted exports to Algeria, Indonesia and Bangladesh.
“The markets for Russian grain now look more diversified than before the geopolitical crisis,” Zernin said.
“To compensate for the disappearance of international intermediaries from our supply chains, we focused on grain diplomacy, developing direct contacts with the world’s largest importers of wheat and other grains. The result was not long in coming.”
