Extension of preferential transportation of flour from Siberia: a challenge for the industry or an increase in exports?

The Union of Grain and Flour Milling Enterprises has expressed concern over the proposal of State Duma deputies to expand the preferential transportation of flour from Siberia throughout Russia. In a letter addressed to the head of the Ministry of Agriculture, Oksana Lut, the union notes that the proposal to massively supply flour and cereals from Siberia to the European part of the country significantly exceeds demand, and the flour and cereal enterprises in this part of Russia operate at less than full capacity, making most of them unprofitable and loss-making.

The Union believes that such an expansion of preferential transportation could lead to further closure of mills and cereal plants, which in certain circumstances could harm the food security of the most densely populated part of Russia and jeopardize plans to increase flour exports.

Currently, compensation for transportation costs of grain products from Siberia is provided only for exports and supplies to Eastern Siberia and the Far East. The Union has pointed out that Siberian grain producers already have an advantage over their counterparts in the European part of the country due to the low cost of grain.

The State Duma Committee on Agrarian Issues recommended the government to consider the possibility of expanding preferential transportation of flour from Siberia to all regions of the country. This is stated in the protocol of the committee's last meeting held at the end of July. The document also notes that the analysis of pricing in the food market in 2024 showed that the retail markup on flour is 2.7 times: the producer price is 18.8 rubles/kg, the retail price is 51.01 rubles/kg.

According to the Grain Quality Assessment Center, by mid-August, grain product manufacturers in Siberian regions increased exports by 20% to 231 thousand tonnes. Altai Krai was the leader in shipments, sending 146 thousand tonnes of products, including 50 thousand tonnes of flour. Siberian flour continues to conquer the world market with deliveries to 20 countries, where China, Mongolia, and Kazakhstan have shown particular interest in this product. Thailand became an importer of Siberian flour for the first time (23 tonnes).

Overall, from January to July of this year, Russia exported over 740 thousand tonnes of wheat and wheat-rye flour, which is 38% more than in the same period last year. The largest buyer this year, as in 2023, was Afghanistan. Shipments to this country increased fivefold to almost 270 thousand tonnes. China ranks second with a 1.7-fold increase in imports to 80 thousand tonnes, and Iraq ranks third with deliveries of over 68 thousand tonnes of flour.