Cash squeeze to thwart Russia's wheat ambitions

 

 

Widespread expectations that Russia is to emerge as the world's top wheat exporter may prove misplaced unless it backs its ambitions with cash, US officials have said.

 

The comments come two days after Russia shared, with Kazakhstan, victory in the latest Egyptian wheat tender.

 

According to an USDA official, the spurt in Russia's wheat exports, which have surged by two thirds to 17.5 million tonnes over the last four years, is to come to a halt, leaving them under 20.0 million tonnes in the coming years.

 

While politicians have huge expectations for shipments - prompting many observers, including other USDA officials, to predict Russia will overtake the US to top of the world exporters' league – financing growth has been threatened by economic crisis, and the focus of what agricultural funds there are to promote livestock farming.

 

"Federal funds for developing crop production are not significant," the US bureau said, noting that while the government has the ability to back grain exports with RUB10 billion (US$325 million) in subsidies, the resolution freeing up the cash has yet to be signed.

The US bureau said that Russia will not be able to become the number one wheat exporter in this decade unless large sums of money are invested in the recovery of agricultural land, and construction and maintenance of wheat export chains from Siberia to the Far East.

 

While Russia potentially had further arable land to bring back into production, with the total employed in crop production slumping by 32% or 37 million hectares since 1992, expansion of wheat into these areas was unlikely, the report said.

 

Even many current areas wheat, planting of which has edged 2.3 million hectares higher to 26.6 million hectares over the same period, may be switched to other crops as growers get cold feed over the grain's "mono-crop" domination, and examine alternatives suited to the livestock farms the government is encouraging.

 

The report stated that given low wheat prices, and government incentives for livestock and poultry production, wheat farmers in regions located farther from export ports may convert their fertile land to oilseeds and fodder crops.

 

Meanwhile, crops favoured could include rapeseed, flax, legumes and soy, and perennial grasses and grains. The report came as Egypt, the world's biggest wheat buyer, opted for to Kazakh and Russian grain for its latest 120,000-tonne order, after a tender announced late on Friday (June 18). Venus, the grain merchant, scooped the order, with shipments of 60,000 tonnes from both countries, and each priced at US$166 a tonne excluding freight.