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


03 August 2012

USDA GAIN: Russia Grain and Feed Update August 2012USDA GAIN: Russia Grain and Feed Update August 2012

In most provinces of the Volga Valley, the Urals, and Siberia, dry and hot weather have continued to damage crops prospects. As a result the FAS/Moscow forecast for Russia’s grain crop in 2012 is lowered to 81 million metric tons (MMT), compared to 94 MMT for 2011. This total includes 47 MMT of wheat, 15 MMT of barley, 7.5 MMT of corn, and 11 MMT of other grains and pulses. Lower production and already tight carry-in stocks will reduce exportable supplies, and the grain export forecast for 2012/13 is also lowered to 15 MMT compared to the record 28.1 MMT in 2011/12. This total includes 11 MMT of wheat, 2 MMT of barley, 1.5 MMT of corn, and 0.5 MMT of other grains and pulses.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Production:

Dry Weather

Although July rainfalls improved grain crop conditions in the central provinces of European Russia, in most provinces of the Volga Valley, the Urals, and Siberia, dryness and hot weather continue to severely damage crop prospects.

Extremely dry conditions were reported in spots in 16 Russian provinces, such as Voronezh, Lipetsk, Tambov, Tula, Orenburg, Astrakhan, Volgograd, Rostov, Penza, Kurgan and Saratov oblasts, in Altay and Stavropol krays and in the republics of Dagestan, Ingushetia and Kalmykia. The total arable land affected by this extreme dryness is estimated at 1.5 million hectares. However, the situation in these provinces and even in different regions of the same province differs significantly. On July 17, 2012, the Ministry of Agriculture reported that an emergency regime connected with these extremely dry conditions has been introduced in 15 regions (almost half of the total) of Saratov oblast, in 11 regions of Kalmykiya Republic, in 15 regions of Stavropol kray, in 7 regions of Rostov oblast and in a large portion of Volgograd oblast. Some fields were also affected by other natural calamities, such as strong hail. In addition, farmers and local phytosanitary officers reported increased area damaged by pests. Locust is found on 4.5 million hectares, and the meadow moth (Loxostege sticticalis) was found on 2.4 million hectares. These pest problems are most severe in Orenburg oblast.

In the southern provinces of the Ural Federal District the grain crop has been seriously affected by drought. In Chelyabinsk oblast grain crops have reportedly been lost on almost 472,000 hectares, or 30 percent of sown area. As for Siberia, dry and hot July weather impacted crop conditions in many Siberian provinces. Thus, mass media has reported that in Omsk oblast 150,000 hectares were lost due to drought, and approximately 300,000 hectares are in poor condition, although rains can still help improve the crop. Weather has been dry all over Omsk oblast, including the northern part which typically gets more rain than the rest of the oblast. In Altay kray there has been practically no rain for 2 months, and farmers began harvesting winter grains and pulses 2 weeks earlier than usual. The situation in the northern and the southern part of Altay kray is very poor (the average yields are only 0.4 MT/ha), but in the eastern part of Altay kray it is better as snow cover was thicker and there was more precipitation. Farmers expect to get 1.5 MT/ha in this part of the kray. Further east in Novosibirsk oblast the situation is also difficult although not as poor as in Altay. Estimated losses are within 20 percent of expected crop. Because of heat, part of crop in the south of the oblast was lost.

Crop 2012 Forecasts

Because of the deteriorating conditions of the spring grain crop in Russia, FAS/Moscow has lowered the forecast for Russia’s grain crop in 2012 to 81 million metric tons (MMT), compared to 94 MMT for 2011. Wheat production forecast is lowered to 47 MMT from 56 MMT last year, and the barley forecast is lowered to 15 MMT compared with 17 MMT last year. Corn production, however, is still forecast at a record 7.5 MMT as rainfall in key central European Russia growing areas in July was favorable for late spring crops, such as corn. Production of other grains and pulses is forecasted at 11 MMT compared with 13.7 MMT last year.

The Russian Ministry of Agriculture decreased Russia’s grain crop forecast to 80-85 million metric tons from the original forecast due to dryness on a significant portion of arable land, as well as other negative factors such as pest infestations and hail damage. However, Agricultural Minister Fedorov has reiterated that the forecasted crop is still close to the 5-year average and is not expected to undermine grain price stability in Russia. As a result, he stated that the Ministry estimates that grain exports will still reach 16-18 MMT.

Industry analysts’ forecasts vary widely for Russia’s grain crop, ranging from 78 to 90 MMT. June-July rainfalls in the central provinces of European Russia were favorable for grain crops, but the continued and worsening dryness and hot weather in Volga Valley, the Urals and some Siberian provinces continued to negatively impact crop prospects. As a result all industry analysts decreased their forecasts by the end of July compared with June forecasts.

Harvest Progress

Unlike in previous years, so far the Russian Ministry of Agriculture has not published regular reports on the progress of grain harvest. As a result information on the harvest progress is taken from different media articles.

Early hot weather in the spring resulted in winter grain crop development being accelerated and as a result the harvest began about 2 weeks earlier than in the normal year. This earlier harvest is illustrated by the fact that with the influx of new crop grain, Russian grain stocks increased significantly in June (see chart in Stocks section of this report), while typically stocks continue to fall through June. By July 23, 2012, farmers in the Southern and North Caucasus Federal Districts has almost finished harvesting grains, except corn and rice:

  • Farmers in Krasnodar kray harvested 5.3 MMT (in bunker weight), from 1.3 million hectares, or 96 percent of area planned to be harvested, with the average yield of 4.0 MT/ha. Their wheat crop (all winter wheat) was harvested from 97 percent of wheat area and was 4.57 MMT (average yield is 4.19 MT/ha). For comparison, last year by July 20 farmers in Krasnodar kray harvested 6.1 MMT of grain (in bunker weight) from 1.1 million hectares with average yield at 5.43 MT/ha, and when they finished harvesting grains by the end of July, the total grain crop in bunker weight (without corn and rice) reached 8.1 MMT with the average yield of 5.54 MT/ha
  • Farmers in Stavropol kray harvested 3.7 MMT from 1.68 million hectares, or 90 percent of planned harvest area, with the average yield of 2.2 MT/ha. In 2011, by July 20 farmers harvested 4.8 MMT of grain from 1.3 million hectares with the average yield at 3.8 MT/ha, and by the end of July they almost finished harvesting grain and harvested 6.5 MMT with the average yield at 3.9 MT/ha;
  • By July 23, 2012 farmers in Rostov oblast harvested 4 MMT, average yield – 2.4 MT/ha.

All three provinces reported a high share of food quality wheat in the harvested crop. Thus, in Stavropol kray the share of food quality wheat in the wheat crop is 91 percent and in Rostov oblast 83 percent.

The harvest in the Central European Russia is in full swing, and mass media reported that grain crops are close to average, and in some provinces are above average. Thus, in the beginning of harvesting grain, Kursk oblast reported the average yield at 3.58 MT/ha, Orel oblast – 3.3 MT/ha, and Belgorod oblast – 3.25 MT/ha. Details on the harvest progress in the Central Federal District are not available in the media.

Trade:

Russia’s total grain exports in July 2011 – June 2012 were 28.1 MMT, including 21.6 MMT of wheat and flour (in grain equivalent), 3.5 MMT of barley, 1.9 MMT of corn, almost 0.7 MMT of peas, and over 0.4 MMT of other grains, including rye and milled rice.

FAS/Moscow decreased grain exports forecast for MY 2012/13 to 15 MMT as a result of tight stocks and lower production reducing exportable supplies. The grain export forecast includes 11 MMT of wheat, 2 MMT of barley, 1.5 MMT of corn, and 0.5 MMT of other grains and pulses.

Russia's Grain Export

In the July 2012, the first month of the new marketing year, exports had good start and were aided by the earlier harvest which boosted export availability. According to the Russian Ministry of Agriculture, from July 1, 2012 through July 22, 2012, Russia exported 0.9 MMT of grain, including 763,000 MT of wheat, 109,000 MT of barley, 5,000 MT of corn, and 25,000 MT of other crops. In the first three weeks of July 2011 Russia’s grain exports were 1,587,000 MT, a significant portion of which was grain accumulated at export elevators during the export ban of 2010/11.

Due to rising grain prices in world markets and an increasing U.S. dollar to Ruble exchange rate, Russian grain traders have strong incentive to export grain. In addition, in 2011 and 2012 several large companies made significant investments in grain export terminals and logistics, and will want to maximize export in order to help recoup their investments.

Stocks:

Rosstat reported that at the beginning of marketing year 2012/13, July 1st, Russia’s grain stocks in agricultural, storing and processing enterprises increased from June 1, 2012 by 76,000 metric tons to 16.85 MMT. These stocks include 4.9 MMT of intervention grain. However, industry analysts report that these stocks include both carry-over stocks from MY 2011 and grain of new crop. Since harvest in the south of European Russia this year began in the middle of June, almost 2 weeks earlier than last year, grain of new crop comprises a significant portion of stocks in this area.

Stocks in the South of European Russia (Southern and N. Caucasian Federal District)


Change in Grain Stocks from June 1 to July 1, 2012, by Federal Districts

Some industry analysts estimate Russia’s carry-over stocks at the end of MY 2011/12 at 13 MMT without grain stored at small farms, and at 15 MMT with grain stored at small farms. Rosstat July data on stocks does not include grain stored at small farms and households, which may add up to 3 MMT, and will not be estimated by Rosstat earlier than August 2012.

Policy:

The Russian Ministry of Agriculture has reported that the government does not envisage any restrictive measures on grain exports. In the middle of July the Russian Government has approved the State Program on Development of Agriculture in 2013-2020, which envisages support of crop production. However, the Program has not been published yet, and the details of this support are not available to the public, although the key focus of Russian agricultural policy seems to be to continue supporting the livestock sector. At the moment the attention of Russian policy makers is targeted towards adjusting of Russian agriculture to WTO requirements.

Marketing:

Prices

Russian’s domestic grain prices continue increasing and are being supported both by rising world grain prices as well as deteriorating crop prospects in Russia. Wheat prices in the Southern and North Caucasian federal districts, Russia’s major grain exporting regions, increased from last month by 18 percent to 8,870 rubles ($274) per MT for milling quality wheat of Class 3 and 8,680 rubles ($268) per MT for milling quality wheat Class 4. In other regions, which are not export-oriented, wheat prices were increasing also, but the maximums were almost 1,250 rubles ($39) per MT lower than in the South of European Russia. Industry analysts report that in the end of July farmers in the Central Federal District also began selling grain of new crop, and because of this the increase in wheat prices has slowed down.

Prices of Wheat Class 3, by Regions, Rubles

Source: ProZerno

Prices of Wheat Class 4, by Regions, Rubles

Source: ProZerno

Historic data on wheat prices in the European Russia show that wheat prices (in rubles) in July 2012 have not reached the highs of late winter 2008, but had already exceeded the level of prices in January 2011. In the U.S. Dollars wheat prices in European Russia are still significantly lower than the 2008 peak.

Grain Prices, European Russia, EXW

Source: proZerno


Grain Prices, European Russia, EXW

Source: ProZerno

August 2012

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