“Considering that gas is half of the price, the benefit is obvious”

Russia’s Ministry of Agriculture urges farmers to drop diesel and petrol in favour of natural gas

“Considering that gas is half of the price, the benefit is obvious” Photo: Stanislav Melnikov

Using gas instead of more expensive diesel and petrol can help farmers save money, considers Russia’s Ministry of Agriculture, as motor fuel expenses represent up to 15% of grain cost. The government suggests using preferential loans for buying new machinery running on natural gas or refitting the existing equipment.

Russian authorities are urging farmers to switch from diesel and petrol to more cost-effective natural gas, says S&P Global Platts citing a statement of the Ministry of Agriculture. According to Minister Dmitry Patrushev, farmers acquired more than 5 million tonnes of motor fuel at a cost of over 270 billion rubles ($4,23 billion) last year. “Considering that gas is half of the price, the benefit is obvious to everybody,” said the minister.

According to the ministry’s previous estimates, demand in the 2019 spring agricultural season amounted to 1,9 million tonnes of diesel, which is predominantly used by Russian farmers, and 300,000 tonnes of petrol. Demand usually surges during the spring sowing works and the autumn harvest. Overall, motor fuel represents 11% of the cost of winter wheat and 15% of spring wheat. Farmers can use preferential borrowing financed by the government for buying tractors and automobile equipment running on natural gas or refitting the existing equipment.

Earlier this year, the Kremlin approved a long-term strategy to develop the country’s grain complex up to 2035. Russia’s grain production is expected to increase by 33% compared to 2018 to 150,3 million tonnes a year, while export volumes are set to add 16% to 63,6 million tonnes. In the current agricultural year starting in July, the ministry expects grain exports to total 45 million tonnes. The grain harvest is supposed to amount to 120 million tonnes, up 6% compared to the previous year.

Earlier this year, the Kremlin approved a long-term strategy to develop the country’s grain complex up to 2035. Photo: kremlin.ru

Meanwhile, Russia’s VTB Bank, which is now actively expanding its grain business in a bid to create a national grains champion “to curb the role of foreign traders and give the state greater control over exports”, is planning to exit the sector after building up the assets, says Reuters. The bank became a major physical grain exporter after buying a local grain trader in August. It is now also the largest operator of Russia’s grain export terminals and other infrastructure. “We have not finished the expansion yet. We do not rule out building new grain terminals in the Black Sea,” said VTB CEO Andrey Kostin. “After we consolidate and wrap up this business, we will exit these assets,” he added.

By Anna Litvina