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All news / Analysts: agribusiness industries have a good margin of safety against the strengthening of the ruble

  • 05 Aug 2022, 12:09

The agro-industrial complex has a good margin of safety against the strengthening of the ruble exchange rate, follows from the report of the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) “Balance of Payments and Exchange Rate”. Fishing and fish farming are among the sectors most resistant to the potential strengthening of the ruble exchange rate, where, according to analysts, there will be no losses even if the exchange rate is below 16 rubles. per dollar.Analysts: agribusiness industries have a good margin of safety against the strengthening of the ruble

The experts made this conclusion by calculating the level of the “break-even” exchange rate for each of the significant sectors of the economy, which means that when the dollar exchange rate moves below the estimated level, the industry begins to incur losses. In addition to fishing and fish farming, the list includes crop and livestock farming, the break-even point of which is 17 rubles. per dollar. For the production of food products - 39 rubles. per dollar. For comparison, the worst situation is in forestry and logging, here the business becomes unprofitable already at the exchange rate of 63 rubles. per dollar.

Georgy Ostapkovich, Director of the Center for Business Research at the National Research University Higher School of Economics, told Agroinvestor that fish farming and fishing is one of the most profitable activities in Russia. Profitability there, according to the expert, is about 60%. “For them, the impact of the dollar is really not that noticeable. In addition, everything depends on how the industries indicated in the study work in the foreign market,” he commented.

In general, the position of the dollar for economic activity is not very significant, continues Ostapkovich. “If enterprises have a large export component, then a strong dollar is better for them. Then they will receive more dividends and dollar profits. If a company operates in the domestic market, then a strong ruble is better for it,” the expert reminds. With crop and livestock, things are not as good as in fish farming, continues Ostapkovich. “They are in a state that can be described as more or less normal, but there are no space successes,” the expert added.

Vice-President of the Russian Grain Union Alexander Korbut told Agroinvestor that profitability in crop production has now dropped quite a lot and is in the region of 7-11%. “At the current exchange rate of the ruble, the export of most types of agricultural products is not very effective. The export of grain and vegetable oil is solely due to lower prices, which are approaching the level of production costs,” the expert commented.