New BRICS grain exchange idea gains traction

Russia’s proposal to form a BRICS grain exchange appears to be gaining momentum.

BRICS is an intergovernmental organization comprising Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia and the United Arab Emirates.

The idea for a BRICS grain exchange was originally tabled by the chair of Russia’s Union of Grain Exporters in March.

It gained momentum at a meeting of employees of the agriculture sector when it was endorsed by Russian President Vladimir Putin.

And it now appears to have support from the BRICS group of countries, according to Russian agriculture minister Oksana Lut.

“We are grateful to all BRICS member countries for their support of the Russian initiative to create the BRICS grain exchange,” she told reporters following the 14th meeting of BRICS agriculture ministers, according to the TASS Russian News Agency.

“Now, in accordance with the instructions of the president of the Russian Federation, Vladimir Vladimirovich Putin, we will work together with our colleagues on the creation and development of this platform and the development of the possibility of settlements in national currencies of the BRICS countries.”

Analysts had been skeptical that the idea would gain traction in the BRICS community.

Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance and a former Canadian diplomat in Brazil, told the Western Producer in April that he thought it was a crapshoot.

“BRICS’s members are not aligned on very many issues, and it is not easy to see how they could come to a common position on international grain markets,” he said.

Vince Peterson, president of U.S. Wheat Associates, said he would be surprised if the proposed exchange sees the light of day.

“I’m pretty skeptical whether anything gets off the ground,” he said.

Peterson said Russia’s interests as the world’s largest wheat exporter are at odds with importers such as Egypt and Brazil.

“There are some just diametrically opposed points of view,” he said.

“You can’t imagine the Egyptians having the same point of view about setting supplies and prices as what Vladimir Putin has. Those would be on opposite ends of the scale.”

But Lut’s comments indicate that Russia’s proposal has considerable support heading into the BRICS summit to be held in Russia in October.

BRICS countries account for 42 per cent of world grain production and 40 percent of global consumption.

GrainFox chief analyst Neil Townsend does not think a BRICS grain exchange would have much impact on Canadian farmers and traders.

He thinks the grain exchange would essentially perform the same interventionist role the Russian government plays in the wheat market right now.

“It’s going to be 100 per cent manipulated and political and nobody’s going to think that’s the actual market,” he said.

Townsend said Russia, India and China consistently violate international trade rules, and he doesn’t see that changing.

“They all have a humongous amount of corruption, so forming their own little grain exchange is not going to solve that corruption,” said Townsend.

“Boy, if I were in Brazil, I’d be really angry if my government was going along with that.”

He said Brazil still has a modicum of free market spirit in its agriculture sector. He thinks a BRICS grain exchange would make it harder for Brazil’s farmers to turn a profit because of what he anticipates will be a lack of transparency.

He thinks it’s just a bunch of BRICS millionaires patting themselves on the back for trying to break the U.S. hegemony in global currency markets while stuffing their pockets with those same U.S. dollars.

Tags: grain exchange, BRICS, Russia, China, wheat, India, Market