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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


18 April 2012

USDA GAIN: Russian Oilseeds and Products Annual 2012USDA GAIN: Russian Oilseeds and Products Annual 2012

Soybean production is expected to continue to increase and is forecast at 1.8 MMT, a 3 percent increase from last year, while rapeseed production is forecast at 0.9 MMT, a 15 percent decline from 2011. Russia’s soybean imports are expected to continue to grow as a result of strong feed demand and increasing crushing capacity. Exports of oilseeds are expected to decrease in MY 2012/13, although with WTO accession and the subsequent future reduction or removal of export duties on major oilseeds will likely boost exports in the longer-term.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Commodities:

Oilseed, Sunflowerseed
Oilseed, Soybean
Oilseed, Rapeseed
Oilseed, Peanut

Oilseed Production:

FAS/Moscow forecasts that in MY 2012/13 area sown to Russia’s main oilseeds (sunflowers, soybeans and rapeseeds) will decrease by 0.6 million hectares, or 6 percent from the previous year, to 9.1 million hectares. Assuming average weather, production of these three major crops is forecast to reach 11.2 MMT in MY 2012/13.

Production of oilseeds in Russia has been increasing since the beginning of 2000s. The increase was stimulated by construction of new large crushing facilities and growing domestic demand for oilseeds. In 2011 area sown to oilseeds increased by 9 percent and reached 10.4 million hectares, of which 9.7 million hectares were sown to Russia’s three main crops (sunflowerseeds, soybeans and rapeseeds).

Russia: Oilseeds Production, 1,000 MT

Sunflowerseeds

FAS/Moscow forecasts sown area for sunflowerseeds to fall by 0.6 million hectares in 2012. While in 2011 area planted reached a record due to early spring dryness that prevented the sowing of spring wheat, this year the weather situation is not as negative for spring wheat sowing. In addition, sunflowerseed prices have been decreasing and returns from sunflowerseed at less efficient farms, which cannot afford superior seeds and chemicals, have been decreasing. As a result, this may stimulate these producers to return to better agronomic crop rotations and reduce sunflowerseed area. Assuming normal weather (and thus a reduction in yields from last year’s excellent weather), as well as a small shift in area from higher to lower yielding provinces, Russia’s sunflowerseed crop is forecast to fall to 8.5 MMT in 2012 from 9.7 MMT.

South European Russia (Southern and North Caucasian federal districts) remains the major sunflowerseed producers, followed closely by the Volga Valley Federal District, where sunflowerseed production in the last 5 years increased by 160 percent to 3.2 MMT. The Central Federal District also increased production of sunflowerseeds in the last 5 years by 150 percent to 2.6 MMT. The Chart shows production in 2011 by major federal districts.

Soybeans

Soybean sown area is forecast to continue to grow and this increase is driven by rising demand for soybeans domestically from the livestock and poultry industries. FAS/Moscow forecasts soybean area to increase by 0.1 million hectares to 1.3 million hectares in 2012, which will allow production of 1.8 MMT of soybeans up slightly from 2011. The fastest growth for area continues to occur in the Russian Far East. The administration of Amur oblast (Far East Federal Districts), Russia’s major producer of soybeans, forecasts higher sown area which will offset expected lower yields from last year’s excellent crop. Although industry specialists consider that the Far Eastern soybeans are mostly consumed domestically, and that the low protein content of these beans is a limitation for their export, in reality soybean production in the Far East may be stimulated by Chinese and Korean demand in soybeans and by development of border trade (transparent and not transparent) with China.

In the middle of 2011 the Russian government launched a targeted program “Development of production and Processing of Soybeans in the Russian Federation in 2011-2013” which envisages an increase in area sown with soybeans to 1.5 million hectares in 2013, primarily due to increased area in the Far East, and an increase of crushing facilities in the Far East (primarily soybean crushing) from 4.6 MMT in 2010 to 6.3 MMT in 2013. The Ministry of Agriculture plans to extend this program to 2020 in the new State Agriculture Development Program 2013-2020, in order to increase production of soybeans to 3.75 MMT by 2020. The budget financing of the program 2011-2013 is small, but due to this program soybean producers will be able to participate in soft-term loan programs to purchase equipment and machines from the state owned dealer Rosagroleasing. However, the major stimulus for increased soybean production in the Russian Far East is growing Chinese demand for meals. With Russia committing in its accession to the WTO to completely eliminate export duties on soybeans within 3 years of joining, this is expected to create an additional incentive for expanding area in the future.

In MY 2011/12 soybean planting and production increased to historic maximum of 1.2 million hectares and 1.8 MMT. Soybean production growth was driven by growing demand of livestock and poultry industries in protein feeds. Historically, soybeans have been grown predominantly in the Far East. In the beginning of 2000s, along with the development of the poultry industry in the European Russia, soybean production increased in the Southern European Russia. However, competition for fertile soil in European Russia is high, and the Far East has greater potential for soybean production growth.

Rapeseeds

FAS/Moscow forecasts rapeseed production in MY 2012/13 to decrease by almost 15 percent to 0.9 MMT. High-yielding winter rapeseed production is concentrated in Southern European Russia, and especially in Stavropol kray, and industry analysts estimate that winter rapeseeds have been negatively affected by winter frosts. This is expected to significantly reduce yields. Meanwhile, area sown to spring rapeseeds is expected to decrease in MY 2012/13 as many farmers consider rapeseed a difficult crop for harvesting and transporting. Rapeseed is primarily produced as a result of demand from Europe for biofuels.

Other oilseed crops

Production of other oilseeds such as linseeds for oil is expected to continue to grow in 2012, due to the profitability of these crops. In 2011, Russian farmers increased area sown to other oilseed crops, such as linseed, mustard, wild flax, and some others to 0.7 million hectares, and the total production of these crops in MY 2011/12 increased to 0.6 MMT (including 0.5 MMT of linseeds). Farmers’ interest has been based on absence of export duties on these oilseeds, except mustard. Besides, some crushers found foreign niche markets for oil and products made from these oilseeds, especially linenseeds. In fact, in 2011 Russia exported 250,000 MT of linseed, including 17,500 to the United States. Since production of linseeds for oil has become profitable for farmers, they may increase area sown to this and some other oilseed crops in 2012.

Oilseed Consumption:

Industry analysts estimate Russia’s oilseeds crushing capacity in 2011 at 13 MMT, and forecast its further growth to 15 MMT in MY 2012/13. Processing of oilseeds is increasingly concentrated at modern, new crushing plants owned by large agro-holding companies, while crushing at small plants is decreasing.

Sunflowerseeds

Assuming that the sunflowerseed crop in 2012 will decrease by 1.2 MMT, FAS/Moscow forecasts sunflowerseed crush in MY 2012/13 to fall by 0.3 MMT to 7.7 MMT. Crush in 2011 had reached a record level as a result of the huge crop and strong demand. A larger decrease in crush in MY 2012/13 is not likely, as oilseed crushing remains a profitable and attractive business for large agro-holding companies, and crushing capacity continues to grow. The forecast volumes of crushing is expected to allow Russia to produce 2.8 MMT of sunflowerseed meal and 3.1 MMT of sunflowerseed oil.

Soybeans

Demand for soybean meal and cake is growing in Russia due to stronger needs from the poultry industry and recovering swine breeding and dairy industries. Along with growing demand, soybean crushing facilities also are expanding, and the major Russian soybean crusher - Sodruzhestvo in Kaliningrad - is planning to add another crushing plant to expand their present soybean crushing capacity from approximately 1.1 MMT a year to almost 3 MMT. FAS/Moscow forecasts soybean crush to increase from 2.5 MMT in MY 2011/13 to 2.8 MMT in MY 2012/13.

Rapeseed

Rapeseed consumption will be driven by the EU demand for use in biofuels, since most of Russia’s rapeseed oil is exported. Rapeseed crush in MY 2012/13 is forecasted at 0.8 MMT, only slightly below MY 2011/12.

Other Oilseeds

Consumption of other oilseeds is relatively small in Russia, but has been growing in the last 2 years. Russian farmers increased production of linseed both for exports, since these seeds are not subject to export duties, and for crushing for oil, which is exported as niche product to some foreign markets.

Oilseed Trade:

Trade in Sunfloweseeds

In MY 2011/12 Russia increased exports of sunflowerseeds despite high export duties as production was high and domestic prices were low. In September 2011 – February 2012 Russia exported 135,000 MT of sunflowerseeds, 87 percent of which were shipped to Turkey. FAS/Moscow estimates sunflowerseed exports to fall in 2012/13 to 200,000 MT, from 350,000 MT in MY 2011/12. This decrease is due to a smaller crop, increasing crushers’ demand, and high export duties.

In accordance with Russia’s WTO commitments, export duties on sunflowerseeds must be reduced from 20 percent (but not less than 35 Euro per MT) to 6.5 percent (but not less than 9.75 Euro per MT) within in 4 years after Russia’s WTO accession. These reductions are supposed to occur in equal installments. In the long term these changes will likely boost exports of sunflowerseeds at the expense of sunflower meal.

Trade in Soybeans

Soybean exports are expected to increase to 100,000 MT in MY 2012/13 and in the longer term will likely continue to grow. At the beginning of March 2012, Deputy Prime Minister Viktor Zubkov reported that because of the large soybean crop in 2011, the government plans to cut the export duty on soybeans to 5 percent from 20 percent for a period until October 1, 2012. The minimum duty level will be reduced to 8.50 Euro per MT from 35 Euro. Industry analysts report that shortly after this announcement soybeans prices in the Far East increased by 12 percent.

In accordance with WTO commitments, all export duties on soybeans will be eliminated within 3 years of accession and these reductions are supposed to occur in equal installments. The removal of export duties will likely boost trade with China, and encourage increased production in the Russian Far East. Despite increased exports, Russia will continue to remain a large importer of soybeans as the main producing area in the Far East is 3,700 miles away from the primary soybean crusher in Kaliningrad (or more than the distance between Atlanta and Anchorage). Imports of soybeans are forecast to increase to 1.2 MMT in MY 2012/13 from 0.8 MMT in MY 2011/12. A further increase in imports in the next few years is also expected after Sodruzhestvo’s new crushing plant starts working at full capacity.

Trade in Rapeseeds

Rapeseed exports are forecast to decrease as rapeseeds are difficult to transport, and farmers will more likely sell to crushing plants for exports of rapeseed oil.

After WTO accession, export duties on rapeseeds will decrease from 20 percent (but not less than 35 Euro per MT) to 6.5 percent (but not less than 11.4 Euro per MT) within in 3 years after Russia’s WTO accession. These reductions are supposed to occur in equal installments. Despite these changes, it is expected that most rapeseeds will still be crushed domestically and oil exportered due to transportation difficulties of the seeds.

Recently GOR issued a Resolution #88 of February 6, 2012 that confirmed the current export duties (export duties on commodities exported from the Russian Federation to the non-CU countries) on soybeans, sunflowerseeds, rapeseed and mustard. The expected exempt for soybeans will be temporary, and will last, as announced until October 1, 2012.

Policy:

The Russian government has adopted several programs directly or indirectly targeted at improvement of the oilseeds industry, such as the Program on Development of Rapeseeds, Program on Development of the Soybean Industry, and Program on the Development of the Feed Industry. However, the financing of these programs is small, and farmers may benefit from government support that applies to all crop production (fuel and fertilizer price discounts, soft term-loans) more than from the above listed programs. However, grain still remains the priority in the Russian government policy, especially when it comes to policies of provincial administrations.

Sunflowseeds have been profitable for farmers but at the local level agricultural administrations have warned and tried to discourage farmers from expanding area sown to sunflowerseeds due to disease and soil fertility concerns from farmers planting sunflowerseeds too close together in the crop rotations.

In 2011/12 the Russian government has increase indirect support of soybean producers by introducing in the end of 2011 a 0.5 coefficient for railway tariffs for shipping soybeans from the Far East to Siberia and European Russia.

Import of soybeans, peanuts and sesame to Russia are duty-free. Imports of other oilseeds are subject to 5 percent import duty. The import requirements and tariffs can be found on the site of the Russia Customs Service: www.tks.ru.

Commodities:

Meal, Sunflowerseed
Meal, Soybean
Meal, Rapeseed
Meal, Fish

Meal Production:

After a huge jump in oilseed meal production in MY 2011/12, FAS/Moscow forecasts only a slight increase in oilseed meal production to 5.6 MMT in MY 2012/13 (from 5.5 MMT in 2011/12 and 4.0 in 2010/11). This increase is due to higher production of soybean meal to 2.2 MMT, while production of sunflowerseed meal is forecast to decrease slightly by 0.1 MMT to 2.8 MMT.

Meal Consumption:

Domestic demand for protein feeds and feed preparations is getting stronger along with the development of poultry and livestock industries in Russia, and the increasing concentration of poultry, meat and milk production at large industrial complexes. These operations use more compound feeds with high protein content than smaller scale operations or private households. For more information on the demand in feeds and on the development of feed industry see GAIN report RS1217 _ Russian Feed Sector Continues to Develop but Obstacles remain _ Moscow _ Russian Federation _ 3/14/2012.

FAS/Moscow forecasts that Russia’s total domestic consumption of the three major oilseed meals (sunflowerseed, soybean and rapeseed meal) will increase to 4.8 MMT in MY 2012/13 compared with 4.5 MMT in MY 2011/12.

Meal Trade:

Despite high domestic demand for protein feeds, a significant portion of sunflowerseed meal is exported, as crushers prefer shipping sunflowerseed meal abroad on stable contracts with steady buyers. Meanwhile, domestic poultry producers and other consumers of protein feeds prefer purchasing soybean meal, either domestic or imported. FAS/Moscow forecasts sunflowerseed meal exports in MY 2012/13 at 1.1 MMT, only a slight decrease from the previous year. Imports of soybean meal are forecasted to remain steady at 0.6 MMT in MY 2012/13. The import duty on soybean meal remains 5 percent despite the continued efforts of domestic poultry producers to lobby for its removal. However, with Russia’s WTO accession, soybean meal import duties are required to immediately fall to zero. Meanwhile, rapeseed meal import duties are also required to fall with WTO accession from 5 percent to zero by 2013.

Policy:

The government program on the Development of the Feed Industry will continue through 2014, and envisages increased production of protein feeds such as soybean meal. However, financing of this program is low and the development of the feed industry is driven by growing poultry and livestock industry demand rather than by direct government support of soybean meal production.

Commodities:

Oil, Sunflowerseed
Oil, Soybean
Oil, Rapeseed
Oil, Palm

Oil Production:

Sunflowerseed oil

Sunflowerseed oil remains the major vegetable oil in Russian and comprises approximately 65 percent of domestic consumption. FAS/Moscow forecasts that sunflowerseed oil production in MY 2012/13 may decrease slightly by 0.1 MMT to 3.1 MMT due to lower sunflowerseed production. However, this decrease is expected to result in lower exports, with domestic consumption remaining largely the same.

FAS/Moscow estimates sunflowerseed oil production in MY 2011/12 at 3.2 MMT. Russia’s state Statistical Service (Rosstat) has changed the parameters of reported vegetable oil production several times in the last 3 years, and does not include vegetable oil production at small plants and on-farm crushing operations. The role of small crushers is decreasing, but they still produce a large portion of sunflowerseed oil for local consumers and for farmers’ own consumption. According to Rosstat, production of crude sunflowerseed oil at large enterprises in September 2011 – February 2012 was 1.8 MMT, or 48 percent more than in September 2010 – February 2011. Assuming that in the next 6 months of MY 2011/12 Russia’s major crushers will be producing sunflowerseeds in volumes close to the 3 years average, sunflowerseed oil production at major crushing plants may reach 3.0-3.1 MMT, also approximately 48 percent more than in the MY 2010/11.

Other vegetable oils

Production of soybean oil is increasing along with the growth of domestic soybean production and imports, but the share of soybean oil in domestic consumption does not exceed 10 percent of the total domestic consumption. Consumers continue to prefer sunflowerseed oil to soybean oil. FAS/Moscow estimates soybean oil production in MY 2011/12 at 4440,000 MT, and forecasts its increase in MY 2012/13 to 0.5 MMT. Production of rapeseed oil is estimated at 330,000 MT in MY 2012/13, and the same volumes are forecast for MY 2012/13.

Oil Consumption:

Russia’s per-capita vegetable oil consumption (food and industrial) is estimated at approximately 24 liters per capita per year, and this is still lower than in Europe and in the United States. However, food use domestic consumption has been stable and is not forecast to increase in MY 2012/13, while industrial consumption may continue increasing along with the development of Russia’s food industry.

Oil Trade:

FAS/Moscow forecasts sunflowerseed oil exports in MY 2012/13 to decrease by 0.1 MMT to 1.0 MMT. Exports in MY 2011/12 reached a record and in September 2011– February 2012 Russia has already exported over 530,000 MT of sunflowerseed oil, including 431,600 MT of crude vegetable oil and almost 88,700 MT of refined sunflowerseed oil. Crude sunflowerseed oil was exported to over 20 countries, and the major markets for crude oil were Turkey (182,200 MT), Egypt (120,100 MT), and Italy (31,500 MT). Refined sunflowerseed oil was exported primarily the CIS countries and some other neighbor countries. The major markets for Russia’s refined sunflowerseed oil were Uzbekistan (41,600 MT), Kyrgyzstan (11,500 MT) and Tajikistan (7,700 MT). Imports of sunflowerseed oil, mostly from Ukraine, do not exceed 30,000 – 50,000 MT a year.

Soybean oil imports are low and do not exceeed 10,000 MT a year. For exports, after construction of the major soybean crushing complex in Kaliningrad, Russia began exporting soybean oil. In September 2011– February 2012 Russia exported 61,400 MT of soybean oil and the major markets for Russian soybean oil were France (15,100 MT), Uzbekistan (13,700 MT), and the United Kingdom (10,500 MT). Russia’s total soybean oil exports in MY 2012/13 are estimated at 150,000 MT, the same as in 2011/12 but will likely rise in the future when increased crushing capacity in Kaliningrad comes on-line. While there is strong demand for soybean meal in Russia, this is not the case for oil and hence the exports.

Rapeseed oil exports have been increasing since 2007, along with growing European demand for use in biofuels. FAS/Moscow forecasts MY 2012/13 exports at 200,000 MT, the same as 2011/12. In July 2011 – February 2012 these exports reached 165,000 MT.

In the last 5-6 years Russia has become one of the largest importers of palm oil. FAS/Moscow forecasts some decrease in palm oil imports in MY 2012/13 to 530,000 MT (from 560,000 MT in MY 2011/12) due to the possible prohibitions of the use of palm oil in products that are called “dairy”, if the Custom Union’s technical regulation on milk and dairy products is adopted in the currently discussed format. In October 2011-February 2012 Russian imported 233,000 MT of palm oil.

Policy:

Russia regulates production of vegetable oils by the safety and quality requirements stipulated in the Russian Technical Regulation (TR) on Oils and Fats (Federal Law of the Russian Federation #90-FZ of June 24, 2008). Beginning July 1, 2013 this Russian TR will be replaced by the Customs Union TR on Oils and Fats, adopted by the Customs Union Commission on December 9, 2011: http://www.tsouz.ru/db/techreglam/Documents/TR%20TS%20MasloGirov.pdf.

Russia’s trade policy also influences the domestic vegetable oils market. Vegetable oils are exported duty-free and import tariffs on vegetable oil vary for different oils. Updated information on import tariffs on different vegetable oils is available on the web-site http://www.tks.ru/db/tnved/tree. Import tariffs on vegetable oils for industrial processing are lower than tariffs on imports of vegetable oil for packaging and for direct human consumption. Thus, import duty on sunflowerseed oil for non-food industrial consumption is 15 percent, and for oil imported for food consumption imported in packs of 10 liters and less the import duty is 15 percent, but not less than 0.14. Import duty on soybean oil is 15 percent, and for soybean oil imported in packs of 10 liters and less the import duty is 15 percent, but not less than0.14 euro per 1 kg. The significant exception in tariffs was made for palm oil. At present imports of palm oil for industrial consumption (HS code 1511 101 000) is duty-free. Import duty for palm oil not-for-industrial consumption in 20 MT’s and less packages is 400 Euro per MT. Import duty for the same oil in packages over 20 MT is duty-free. Import tariffs for some oils will be reduced slightly with WTO accession.

April 2012

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