Russia grain production to fall on smaller area

 

 

Russia's total grain production in marketing year 2009 is forecast to decrease by 13 million tonnes to 95 million tonnes. The decrease is due to a slight reduction in sown area and lower spring yields, according to a US Department of Agriculture attache report posted Friday (April 3) on the Foreign Agricultural Services Web site.

 

Area sown to winter grains increased by 1.6 million hectares from last year, and the winter grain crop will be equivalent or greater than in marketing year (MY) 2008. Grain imports will be less than 1 million tonnes, while grain exports may reach 20 million tonnes, almost a 1million tonnes increase from MY 2008.

 

Feed grain consumption will increase by 3.5 percent to 41 million tonnes. Grain carry-over stocks by the end of the year are forecast at 16 million tonnes, including approximately 9 million tonnes in the grain intervention reserve. As a result of the economic crisis, government influence and control will be more prevalent in the domestic grain market and in exports.

 

Given normal weather conditions in April - August 2009, the grain production in Russia may reach 95 million tonnes (including rice in paddy equivalent) in MY 2009. This crop will be 13 percent lower than the last year's record, but may be the second highest crop since 1993. Russian's official grain crop forecasts for MY 2009 vary from 80 million tonnes to 100 million tonnes. The "uncertainty" factor will be weather and spring sowing.

 

Russia's financial crisis and shortage of storage capacity coupled with forecast high end-of-year grain stocks may temper spring grain sowing. On the other hand, winter grains have been sown to 17.1 million hectares, up 1.6 million hectares from last year. As of mid-March winter crops were mostly in good to satisfactory condition. Thus, winter grain yields may be as good as last year and the winter grain crop, which in Russia accounts for 37-42 percent of the total grain crop, may reach 45-48 million tonnes. However, the spring grain crop will be lower than in 2009. The economic situation, availability and cost of inputs, agronomic practices, and access to storage facilities differ significantly by Russian territories. At present it is difficult to predict local farmers' decisions on spring sowing. Although Russia does not have government set-a-side programmes, farmers may decrease spring grain planting, and leave some land fallow or transfer land to pastures. Many Russian farms depend on crop rotation, and also produce grain for their own livestock. Therefore, these two factors may force many farmers to sow spring grain on almost the same territory as last year. Spring yields may decrease as it is anticipated that farmers will reduce their investments in cultivation, e.g. reduction in fertilizer and use of new technology. Thus, the forecast decrease in grain crop is attributed to slight decrease in spring sowing, and to lower spring crop yield.

 

Wheat production is predicted at 58 million tonnes, a 9 percent decrease from last year's record. Barley production will drop by almost 20 percent from last year's record to 19 million tonnes.

 

Corn production will decrease by 7 percent to 6 million tonnes, due to lower yields. Financial constraints will prevent farmers from investing in improved seeds, and yields may be lower than in 2008. Rye production will decrease by 8 percent to 4 million tonnes. Scientists encourage farmers to increase diversity of grain crops (oats, millet, buckwheat, triticale, etc.) and legumes, but it is unlikely that in 2009 farmers will take the risks of switching to new crops, and will rather keep to traditional crops for which the government has promised procurement interventions. Thus, the total production of these crops in 2009 will be slightly over 7 million tonnes (9.26 million tonnes in 2008). Oats production will comprise more than half of this crop, but will drop by 16 percent from the 2009 level to 5 million tonnes. Oats producers complain that the domestic demand for oats is small and decreasing. Feed consumption of oats is replaced by cheap wheat and barley, and the food industry does not compensate for this decrease, because does not care to expand oat based foods.

 

In the beginning of 2009, some Russian grain traders began asserting that Russia does not need a 20 percent increase in grain production by 2012, as was envisaged by the Government Programme for Agriculture 2008-2012. Per these experts, improving grain storage, infrastructure and logistics, developing foreign markets for Russia's grain, and increasing domestic grain consumption should be the government's priorities. However, these ideas have not yet materialized in the Government Programme for Agriculture 2008-2012.

 

Russia's grain imports in MY 2009 will remain 820,000 million tonnes, equal to the MY 2008 estimate. Wheat imports will increase at the expense of more active border trade with Kazakhstan (up to 400,000 tonnes), while imports of barley will decrease be cut in half and fall to 100,000 tonnes. Imports of corn and rice will remain unchanged (100,000 tonnes and 220,000 tonnes respectively).

 

Exports in MY 2009 are forecast to increase by 3.9 percent to 20 million tonnes, including 17 million tonnes of wheat (including wheat flour in grain equivalent), 2 million tonnes of barley, 400,000 million tonnes of corn, and 100,000 million tonnes of rye. Commercial exports will primarily depend on world market prices, and on the value of the ruble. The availability of storage and port facilities may be a limiting factor for grain exports. In MY 2009 the Russian government may significantly increase its role in grain exports due to creation of the Uniform Grain Company, and more active participation in international humanitarian and assistance programmes.

 

In MY 2009, feed grain consumption is forecast at 41 million tonnes, a 3.5 percent increase from the USDA official consumption estimate for MY 2008. There are no official data on feed grain consumption in Russia, and experts' estimates vary from 37 to 42 million tonnes. Livestock farmers may experience serious financial problems in 2009, and demand for grain may decrease. On the other hand, use of grain at the less efficient farms, and at farms with their own grain production may increase. Grain losses, which are included in feed grain consumption, may also increase. Food and industrial grain consumption is forecast at 35 million tonnes, slightly lower than in MY 2008.

 

Due to increased exports grain carry-over end-of-year stocks are forecast at 16 million tonnes, 4 percent less than beginning of year stocks. The Russian Government intends to continue grain procurement interventions in MY 2009 as government officials view 16-17 million tonnes of stocks, including 9 million tonnes of government own grain, as normal in order to ensure food security.

 

In MY 2008 the Russian Government undertook several steps to increase its influence in the grain market including: large scale grain procurement interventions, feed compensations, fuel and lubricant subsidies. Given the present financial crisis, 2009 grain production may depend more on government programmes than economics.