Wednesday, 17 December 2014

The Russian Rouble and the implications for farming

It’s all appears to be going very Pete Tong in Russia with the rouble losing 15% against the dollar between Friday and yesterday.

The farming community in Russia is saying it’s all going mental with fertiliser dealer’s reneging on previous agreements and seed and pesticide suppliers refusing to price product.

After previously lifting interest rates 1% and saying they didn't want to panic the market, Russia’s central bank panicked the market by lifting it a whopping 6.5% and making the announcement at 1am after what appeared to be a crisis meeting.

Russian inflation and crude oil prices continue to add to the pressure as oil and gas make up a sizeable portion Russian exports.

Russian Agriculture Minister Nikolai Fyodorov said that he was waiting government approval to raise the intervention price for grain to increase state stocks from 1.5mmt to 3.5mmt and presumably slow down exports at the same time.

They may well happen anyway as the slump against the dollar has created a big disincentive for Russian farmers to sell their grain but to hold onto crop in a wait and see because surely it can’t get any worse type scenario.

If suppliers are not agreeing prices then farmers with crop to sell will have no significant cash flow demands either so best to hold for now.  

Under these circumstances spring is a long, long way off.

Against this background western commentators with no understanding of how Russians tick and who are more used to politicians resigning after tweeting a picture of a white van are incredulous that President Putin's popularity continues to remain buoyant.

Putin is due to give his annual press conference tomorrow, my guess is he will down play Russia's role in the spluttering economy electing to blame western foreign policy and sanctions.

One of the few Russians prepared to go on record with the BBC summed it up when John Simpson asked for her if life was going to be more difficult in the future while standing in the freezing rain at tram stop number three said “yes but it’ll pass, we will survive”.