Russia’s proposed grain exchange for BRICS countries may take years to launch

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By Olga Popova and Gleb Bryanski

MOSCOW (Reuters) – Russia’s proposal for a new international grain exchange could take years to get off the ground even though the plan was welcomed by members of the BRICS group of countries at a summit this week in Kazan in Russia.

Russia has been pushing to establish the exchange as part of a broader plan to create new financial instruments, detach its trade from the U.S. dollar and help Moscow combat Western sanctions.

President Vladimir Putin said at the summit that BRICS countries, which are among the world’s largest producers of grains, legumes, and oilseeds, could establish such an exchange, potentially expanding it to trade other major commodities.

The plan to create the exchange has been approved by leaders of the BRICS countries, whose members include Brazil, Russia, India, China and South Africa.

The BRICS countries welcomed Russia’s grain exchange plan in their communique at the summit and backed proposals to subsequently develop and expand it to other agricultural sectors.

Eduard Zernin, head of the Grain Exporters Union, whose members export 80% of Russian grain, said that based on the experience of creating the BRICS’ New Development Bank, launching the joint exchange would require years of preparatory work.

Zernin stated that the proposed new exchange should have international status to protect it from potential Western sanctions.

“The main stage of the process has been completed, the initiative to create an exchange has been approved at the level of BRICS country leaders,” Zernin said.

Russia, the world’s biggest wheat exporter, has been striving for years to develop its own commodity pricing mechanisms to counter the dominance of Western exchanges, especially following this year’s decline in global grain prices.

The Russian government, concerned about high export volumes at low prices in the past few months, has informally agreed with leading exporters not to sell Russian grain to sovereign buyers through intermediaries, according to the Grain Exporters Union.

The government has also recommended that exporters not sell wheat at a price below $250 per metric ton, which is well above current levels, Reuters sources have said.

Iran and Egypt, which are now BRICS members, are major buyers of Russian wheat.

NEW EXCHANGE NEEDED?

Some industry analysts questioned the immediate need for a new grain trading platform given the smooth functioning of existing international grain exchanges.

“Due to the advantages that established exchanges have in terms of customers, infrastructure, track record, and liquidity, it will take some time for the new exchange to catch up,” said Yaroslav Lissovolik, head of the BRICS+ Analytics think tank.

Alexander Belozertsev, head of Alexandra Inc consultancy, said that, unlike Russia, other BRICS members, such as India, China, Brazil, and South Africa, already have well-established commodity trading platforms of their own.

“Strategically and technologically, all these exchanges have significantly advanced in trading agricultural derivatives compared to their Russian competitors. Do they really need the implementation of Russia’s initiative under the BRICS umbrella?” he said.