February 11, 2011

 

Russia's crop recovery may not resolve feed shortage

 

Russia's feed shortage caused by drought may not be resolved even if grain output improves, with Soviet-era mills unlikely to continue with a state-backed campaign to increase in livestock.

 

USDA officials, dismissing Russia's release of grain from state stores to livestock farms as a "band aid and not a cure", warned that mills were struggling to keep up with the pace of growth in the meat sector fostered by a plan for self sufficiency.

 

Even an accelerated pace of slaughter last year, in anticipation of higher feed bills following Russia's drought-devastated grains harvest, has failed to slow the pace of annual growth in the hog herd, for example, below 3.4%.

 

Russia's 400 feed mills, meanwhile, have thus far been denied such government support, leaving many little-developed since Leonid Brezhnev was head of state.

 

"Most of the facilities were built in the late 1960s and require major modernisation," USDA attaches in Moscow said in a report.

 

Indeed, only 30% of seed mills "are able to compete with foreign suppliers. Others require renovation and modernisation".

 

The industry's struggle opened an opportunity for feed exporters to Russia even after, as is currently expected, the country's grain harvest rebounds from a near-40% slump in output last year.

 

"Demand for feed in Russia is only expected to grow" thanks to the drive on meat production.

 

"Imports of compound feeds, and especially feed ingredients, might continue and expand even after Russia's domestic grain production recovers in 2011-12," the report said.

 

Indeed, even Russia's more efficient mills were struggling from a shortfall in supplies of protein crops, prompting calls for greater domestic growth for lupins as an alternative to soy, of which Russia has a deficit of about 3 million tonnes a year, and are not as well adapted to colder climates.

 

And there was a "lack of incentives" for incorporating by products such as molasses and dried beet chips into feed.

 

"According to analysts, this could have substituted 2.5 million tonnes of fodder grain annually," the briefing said.

 

Shippers of feed ingredients amino acids and lysine, a protein refined from corn, also appeared to have a market opportunity in Russia, given "very low" domestic production.

 

Russia's one lysine plant is controlled by Chinese investors, and exports to China, "while demand in Russia continues to be very high".

 

The comments come amid the release by Russia's government of grain from state silos, with 500,000 tonnes a month to be sold by tender until June.

 

Dmitry Medvedev, the Russian president, on Wednesday (Feb 9) threatened to halt the process, on allegations of corruption by officials selling direct to farmers.