Russia presents initiative on creation of grain exchange to BRICS partners

MOSCOW. April 18 (Interfax) - Russia has presented its BRICS partners with an initiative to create a grain trading platform for the association, according to a Roscongress press release following the first meeting of the BRICS working group on agriculture, which was held via videoconference.

Furthermore, the meeting announced a conference on food security and sustainable agricultural development, which is scheduled for the end of June in Moscow.

"Foreign partners welcomed the initiatives and planned events of the Russian presidency and noted the importance of strengthening multilateral cooperation in the agricultural sphere," the statement said.

"The start of the discussion on the grain exchange project on the BRICS platform has taken place. The final decision will depend solely on the political authorities of the participating countries, but bringing our proposal to the attention of our colleagues from agricultural ministries is definitely an important step," Eduard Zernin, head of the Union of Grain Exporters, told Interfax.

As reported, in early March at a meeting with representatives of the agricultural sector in the Stavropol region, Russian President Vladimir Putin supported the idea of creating a BRICS grain exchange, calling it very good, and promised to elaborate upon it with partners. The Union of Grain Exporters presented this idea in a letter to the Agriculture Ministry at the end of December last year. Zernin also voiced it at a meeting with the president in Stavropol.

In a letter to the Agriculture Ministry, the Union said its proposal was prompted by the fact that the modern infrastructure of the global grain market was set up after World War II, with wheat and corn supplies from the United States dominating. The market benchmarks used by the BRICS countries, among others, are formed on the basis of grain crop prices on the Chicago Mercantile Exchange (CME). The clearing currency used is mainly the US dollar.

"The BRICS countries, being key participants in the global grain market, cannot fully participate in the formation of prices for economically fundamental and food security-essential products as wheat, barley and corn, world prices for which are formed, and often manipulated, in third countries," the authors of the letter said.

The response to the situation might come by way of setting up a unified BRICS trading and clearing infrastructure, under the auspices of which exchange trading in grain between companies of the member countries of the association will be carried out. "Russia has accumulated unique experience in creating high-tech, productive and reliable exchange trading and clearing platforms (an example is the Moscow Exchange Group). In addition, it has accumulated rich experience in exchange technologies in terms of exchange commodity markets, experience in organizing settlements in the currencies of the BRICS countries and admitting participants from different countries to the unified exchange trading and clearing infrastructure," the letter said.

According to the Union's calculations, as of the end of 2023, the five BRICS nations produced 1.17 billion tonnes of grain crops per year (42% of world production) and consumed 1.1 billion tonnes (40% of world consumption). The group's countries account for 348 million tonnes of wheat harvest per year (44% of world production) and 323 million tonnes (41%) of consumption. Production of corn, which is mainly used for animal feed, totaled 482 million tonnes (39%) while consumption stood at 442 million tonnes (37%).

After the BRICS membership expansion on January 1, 2024, grain production in the association will reach 1.24 billion tonnes per year (44% of global output), while consumption draws very close to production - 1.23 billion tonnes (also 44%).

In wheat, the situation will be similar: production will stand at 377 million tonnes (48%) and consumption at 374 million tonnes (47%). Corn production will stand at 501 million tonnes and consumption at 484 million tonnes. Both indicators represent 40% of global values.