November 23, 2010

 

Rising feed costs in Russia drive farmers to cull livestock

 

 

Rising feed grain prices in Russia are having an impact on Russian farmers, with some small-holders in Russia beginning to slaughter livestock in the wake of a disastrous grain harvest this year.

 

Moscow imposed a grain export ban in August after one third of the Russian grain crop perished in a scorching heat wave and drought. Although intended to protect the domestic market from grain shortages, the ban has failed to halt a surge in Russian feed barley prices that has driven some livestock farmers to cull their herds.

 

Russian pig herds, which are normally reduced before the winter, declined in September and October faster than the seasonal average as farmers, unable to afford soaring feed prices, began slaughtering livestock, according to analysts.

 

Cattle herds have been shrinking by about 1% annually for several years, but high feed prices accelerated the decline to about 3 % on-year in the past few months.

 

Prices for oilseed crops, an important ingredient of animal feed, have soared, putting further pressure on livestock farmers.

 

Falling livestock numbers are a set back for the Kremlin which has set a goal for Russia to become self sufficient in food by 2020.

 

Although not yet widespread, the slaughter has stirred memories of the wholesale cull that took place after Soviet collective farms fragmented in the 1990's and agricultural workers simply ate their herds.

 

Small farmers that account for about half of Russia's beef production and one third of pork production are suffering worse than big meat producers that have enjoyed fat margins in recent year, an analyst said.

 

"In the long term high animal feed prices might be considered good for big producers driving the consolidation of the fragmented meat industry," the analyst said.

 

Furthermore, the slaughter of livestock will strengthen the hand of lobbyists urging the government to tighten restrictions on meat imports to protect Russian producers.

 

Grain stocks accumulated during recent bumper harvests should help cushion Russia against shortages in the coming year.

 

However, the government has delayed the release of stocks that could ease pressure on livestock farmers during the winter months when animals cannot be put out to pasture.

 

Early release of the stocks would depress domestic grain prices and might discourage farmers from sowing spring wheat next year, said the analyst.

 

The government may opt to withhold some grain stocks altogether fearing another bad harvest next year. Winter wheat crops, planted late this autumn as farmers waited for rain to fall on drought-parched lands, may not be hardy enough to survive the first frosts.

 

According to preliminary reports, Russia's grain harvest fell to 60.3 million tonnes this year from 97 million tonnes in 2009, a disastrous decline for those at the bottom of the rural pecking order.