July 7, 2009

In marketing year 2009 Russia's grain sown area is forecast to increase by almost 1.1 million hectares however, grain production is forecast to drop to 96 million tonnes (MT), according to a US Department of Agriculture attache report posted Monday (July 6) on the Foreign Agricultural Services Web site.

This amount is 12 tonnes lower than in MY 2008, due to worse weather, tight financing, and expected higher grain losses at harvest. Grain exports are forecast to decrease by 2.1 MT to 20 MT due to more intense competition in the world grain markets, and a decreasing demand from importers.

 

Russia's grain production forecast in MY 2009 is 60 MT of wheat, 16.8 MT of barley, 6.7 MT of corn, and 12.5 MT of other grains. The Russian Ministry of Agriculture's forecast is 90 MT's, while independent grain experts forecast 95-99 MT's of grain. The total grain planted area in MY 2009 is estimated to be 47-48 million hectares. As of mid-June the winter grain area was 16.2 million hectares (4.5 percent more than in 2008),and spring grains were sown on 30.9 million hectares (1.3 percent more than in 2008).

 

In spite of this increased area, grain production will be less than last years' record harvest (108 MT) because of worse weather and limited financing. Some provinces in the Volga Valley Federal District (Republic of Tatarstan, Samara oblast) forecast significant decreases in crop yields due to droughts. In some provinces of the Southern Federal District farmers have reported an increase of pests, including locusts.

 

Application of effective pesticides may decrease due to farmers' financial constraints. Grain losses at harvesting will increase due to a shorter supply of harvesters in 2009 compared with 2008 because foreign combine operators will not be allowed to offer harvesting services to Russian farmers. Grain exports in MY 2009 are forecast to decrease from MY 2008 by 2.1 MT to 20 MT due to increased world grain supplies, increased competition, and decreased demand in Russia's traditional grain export markets, according to SovEcon.

 

Spring sowing as of mid-June spring grains and legumes were sown on 30.86 million hectares, or almost 99 percent of the area planned for sowing. This was 0.40 million hectares more than in 2008. The area sown for spring grains increased from the 2008 level in the Ural Federal District by 0.41 million hectares to 3.74 million hectares and in the Siberia Federal Districts by 0.20 million hectares to 9.88 million hectares.

 

In the Volga Valley Federal District area sown to spring grains decreased by 170,000 hectares to 9.57 million hectares, and in the Southern Federal District - by 45,000 hectares to 2.80 million hectares. Winter Grains As of mid-June the winter grain area estimate was 16.2 million hectares (4.5 percent more than in 2008). Official information on the condition of the crops is not available, but independent grain analysts estimate good to normal conditions in most of the Russian winter grain producing provinces.

 

However, in the end of June specialists reported that in some of the Volga Valley's provinces winter grains have suffered from almost two months of drought. Thus, in Tatarstan republic the current draught caused losses of an estimated 2 MT of grain. Crops were damaged on 43 percent of the area in 18 regions of the Republic of Tatarstan located in the South-Eastern oblasts. Plants in the Samara oblast were also damaged by this drought. In some provinces of the South Federal District winter grain yields might decrease due to an influx of pests.

 

Given farmers' financial constraints and difficult access to credit resources, purchases of efficient agro-chemicals may be a problem this year.

 

The Ministry of Agriculture reports that fuel supplies meet farmers' needs, and that fixed price agreements with fuel companies allowed farmers to save more than 3.37 billion rubles (US$107 million) in the March-May time period in 2009. Government stimulated fertilizer companies that fix fertilizer prices for farmers, and the supply of fertilizer met 93 percent of farmers' needs this spring, according to Russia's Ministry of Agriculture.

 

The Ministry of Agriculture reports that the condition and quantity of farm agricultural machines and equipment has not worsened in 2008. As of mid-June the Russian fleet of major agricultural machines included 521,857 tractors, 229,420 seeders, 135,226 combines, and 26,954 feed choppers. However, the estimated cost of repair and maintenance of agricultural machines in 2009 is 64.9 billion rubles (US$2.06 billion), which will be difficult for farmers to afford.

 

Grain losses at harvesting may increase this year because of a shortage of combines. In order to protect manufacturers and dealers of Russian combines, the government introduced a 5-days' timeframe for duty-and VAT-free imports of foreign combines for exhibitions and shows. This measure might shrink the number of available combines by 15-20 percent, as foreign combine operators (from Turkey and Poland) will not be able to come to Russia during harvesting season. In addition, grain producers in Central Russia will not be able to rely on combine harvesters from Southern Russia to help them during harvest time as this years' southern crop will be ready 1-2 weeks later than in 2008.

 

Mass media reports that during last 15 years every summer up to 500 harvesters with Turkish and Polish drivers were coming to Russia for seasonal harvesting works on the VAT and duty-free terms. The Russian Union of Producers of Agricultural Machines and Equipment considers that these duty-free harvesters composed 15-20 percent of the whole fleet of harvesters on the Russian grain fields.

 

It is forecasted that Russia's total grain exports in MY 2009 will decrease by 2.1 MT to 20 MT due to a higher world wheat production and a decreasing demand of the major importers of Russian wheat and barley. Wheat and flour exports will decrease by 300,000 tonnes to 17.7 MT, and barley exports will drop by 46 percent due to a lower barley crop in Russia and a decrease in importers' demand.

 

Corn exports will drop by almost 50 percent to 0.7 MT due to a growing domestic demand for corn. Corn is not a traditional Russian export crop. Exports of other grains will remain at the same level as in MY 2008, less than 0.2 MT. Depending on the foreign demand and domestic production, these grains could be rye, millet and rice. The Russian Government intensified promotion of Russian grain abroad through bilateral trade negotiations with traditional and possible new importers of Russian grain such as Brazil and Japan. However, given the world economic crisis and tough competition in the world grain markets, these efforts may not bring significant results in MY 2009.