Focus on Russia
Nov. 7, 2013
Russia has a greater land area than any other country on earth and is one of the world’s most important grain producers, but its grains sector faces a special set of challenges. That vast land mass is a factor behind huge logistical problems, while a variable climate has meant big swings in production volume.
The International Grains Council (IGC) puts Russia’s total grain production at 85.8 million tonnes in 2013-14, compared to 67.1 million the year before. The wheat crop is put at 51.5 million tonnes, up from 37.7 million, while the figure also includes 16.5 million tonnes of barley, up from 13.9 million and 4.8 million tonnes of oats, up from 4 million. Rye production in 2013-14 is put at 3.5 million tonnes, up from 2.1 million.
“In Russia, harvesting of winter wheat was ahead of normal, with average yields recovering from last year’s poor performance,” the IGC said in a report published at the end of August. “In the Urals and western Siberia, the condition of the spring crop was improved by widespread showers, but development still lagged last year due to late planting. Production is expected to rebound from the previous season’s very poor crop.”
Russia is a major grain exporter. The IGC puts its total grain imports at just 400,000 tonnes in 2013-14, compared with 1.2 million following the poor harvest of the previous year, while its exports are put at 18.8 million tonnes, up from 15.5 million.
Imports of 100,000 tonnes of wheat in 2013-14, down from 900,000 the year before contrast with wheat exports at 14.1 million tonnes, up from 11.2 million. Barley imports are put at an unchanged 300,000 tonnes, while exports are 2.8 million, up from 2.2 million.
In August, the USDA in Moscow forecast Russia’s grain exports for 2013-14 at approximately 24 million tonnes, including 17 million of wheat and wheat flour, 3.5 million of barley, 2.5 million of maize, and about 1 million of other grains and pulses. “Some industry analysts are skeptical about the high volumes of exports in MY 2013-14 despite the good crop in the South of European Russia, the major grain exporting region,” the attaché said. “One of the main concerns is potential purchases from Egypt, Russia’s key customer (and which accounts typically for half of all of Russia’s grain exports in the September-November period). Traders report that so far Egyptian demand has dwindled because of shortages of funds for purchases and the changing political situation in Egypt. Another concern is increased competition from Ukraine in key markets.”
According to the IGC, Russia is also set to produce 1.2 million tonnes of rapeseed in 2013-14, a record figure and up from 1 million the year before. Its exports of rapeseed are put at an unchanged 100,000 tonnes.
Russia’s role as a major exporter has highlighted logistical problems in recent years. Although certain factors, notably the climate and the long distances involved in transporting grain internally, can not be changed, improvements have been made, as the USDA attaché noted in a recent report on the state of port facilities.
“In the 2011-12 marketing year, when Russian grain exports reached a record, there were many reports of problems in shipping and major bottlenecks at Russian ports,” the report said. “However, the major constraint to exports during these huge months of shipments was primarily the speed and capacity of the intake of grain (due to rail logistics, documentation problems, etc.) rather than the actual speed of loading grain onto ships.”
“Industry analysts report that some of logistical problems have been resolved in the last two years by improved management of grain delivery to ports, although problems remain,” the report said. “In Russia, weather continues to be unpredictable and at times weather can delay ship loading at these ports. For example, in the deep water ports of the Black Sea, southern winds may delay loading as a result of strong waves, as happens often in Taman port. In the shallow water ports of Rostov, wind can reduce the river draft and thus delay the movement of exports for a number of days.”
Government support diminishes
The government is doing less to support the sector. “Direct government support of the grain sector is expected to decrease in 2013-14 because of changes in the methods of support as well as limited federal budget funds for this domestic support,” the attaché said in an annual report on the sector. “Livestock and poultry industries remain the priority for government support, rather than crop production. Longer term mechanisms of grain production support as planned by the government, such as for the restoration/improvement of irrigation, crop insurance, and clarity in agricultural land ownership, will likely not be implemented in 2013.”
In an update published in July, the attaché quoted Ilya Shestakov, the Deputy Minister of Agriculture, grain procurement to replenish the Intervention Fund may begin in September-October 2013 “after the harvesting of major crops is completed.”
“Previously Minister Nikolay Fedorov reported that the Ministry of Agriculture has 5 billion rubles ($155 million) in the budget to conduct grain intervention purchases of the 2013 crop,” the report said. “However, the Ministry calculated that in order to buy 5 to 6 million tonnes of grain to the Intervention Fund, the government would need approximately 30 billion rubles ($923 million) of additional credit resources.”
The millers Kirov Mill quote a Federal State Statistics Service (Rosstat) figure putting the total number of mills in Russia at about 7,000. “Actual flour production is 16 to 17 million tonnes, and the largest companies produce about 25% of the total volume,” the company says on its website. “Kirov’s Mill is the largest flour milling plant in Russia and Europe.”
Rosstat puts its capacity at up to 1,800 tonnes of wheat equivalent a day.
However, in April, the RIA Novosti agency reported that the authorities in Russia’s North Caucasus republic of Ingushetia had launched the first stage of a flour mill expected to be the country’s largest flour producing plant.
“By launching the first stage of this enterprise today, we are opening a new chapter in the history of Ingushetia and the republic’s social and economic development. By building a large plant here, we’ll create one of the most powerful grain clusters in the region,” Ingushetia head Yunus-Bek Yevkurov said at the launch ceremony.
“The flour mill project, estimated at 5.2 billion rubles ($168 million), will process 2,400 tonnes of wheat a day when it reaches its design capacity,” the report said. “The mill will produce 1,800 tonnes daily of flour, which will be supplied both to the domestic market and abroad. The second stage of the mill is expected to be launched by late 2013.”
Growing feed sector
The attaché reported on a feed sector conference earlier this year where Vladimir Manayenkov, head of the Feed Office in the Department of Animal Breeding in the Russian Ministry of Agriculture, said that government measures in agriculture have resulted in strong growth, specifically in the pig and poultry sectors, leading to greater demand for compound feeds. “As a result, feed production (both compound and non-compound feed) in Russia has continued to grow, with total feed production estimated up 1 million tonnes in 2012 from 2011,” the report said. About 59% of feed goes to poultry, 30% to pigs and 10% to other livestock. Aquaculture and other sectors account for 1%.”
The report quotes Rosstat as saying that Russia produced 20 million tonnes of feed in 2012, 5.4 million more than in 2009. Manayenkov put total Russian feed production at around 25 million tonnes, blaming discrepancies between Rosstat’s national figure and regional data for the difference.
Valeriy Afanasyev, president of the Russian Feed Union, reported that there were 285 major feed production facilities operating currently in Russia.
“In addition, the Union estimates there are about 193 feedlots operations with smaller annual capacities,” the attaché said.
Chris Lyddon is World Grain’s European editor. He may be contacted at: email@example.com.
Population: 142,500,482 (July 2013 est.)
Religions: Russian Orthodox 15-20%, Muslim 10-15%, other Christian 2% (2006 est.) note: estimates are of practicing worshipers; Russia has large populations of non-practicing believers and non-believers, a legacy of over seven decades of Soviet rule.
Location: North Asia bordering the Arctic Ocean, extending from Europe (the portion west of the Urals) to the North Pacific Ocean.
Government: Federation. Chief of state: President Vladimir Putin (since May 7, 2012); head of government: Premier Dmitriy Medvedev (since May 8, 2012).
Economy: Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. In 2011, Russia became the world’s leading oil producer, surpassing Saudi Arabia. Russia is the second-largest producer of natural gas; Russia holds the world’s largest natural gas reserves, the second-largest coal reserves, and the eighth-largest crude oil reserves. Russia is also a top exporter of metals such as steel and primary aluminum. Russia’s reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country’s high technology sectors, but with few visible results so far. The economy had averaged 7% growth in the decade following the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. According to the World Bank, the government’s anti-crisis package in 2008-09 amounted to roughly 6.7% of GDP. The economic decline bottomed out in mid-2009 and the economy began to grow again in the third quarter of 2009. High oil prices buoyed Russian growth in 2011-12 and helped Russia reduce the budget deficit inherited from 2008-09. Russia has reduced unemployment to a record low and has lowered inflation below double-digit rates. Russia joined the World Trade Organization in 2012, which will reduce trade barriers in Russia for foreign goods and services and help open foreign markets to Russian goods and services. At the same time, Russia has sought to cement economic ties with countries in the former Soviet space through a Customs Union with Belarus and Kazakhstan, and, in the next several years, through the creation of a new Russia-led economic bloc called the Eurasian Economic Union.
GDP per capita: $18,000 (2012 est.); inflation: 5.1% (2012 est.); unemployment: 5.7% (2012 est.).
Currency: Russian rubles (RUB): 31.832 rubles equal 1 U.S. dollar (Sept. 20, 2013).
Exports: $529.6 billion (2012 est.): petroleum and petroleum products, natural gas, metals, wood and wood products, chemicals, and a wide variety of civilian and military manufactures.
Imports: $334.7 billion (2012 est.): machinery, vehicles, pharmaceutical products, plastic, semi-finished metal products, meat, fruits and nuts, optical and medical instruments, iron, steel.
Major crops/agricultural products: Grain, sugar beets, sunflower seed, vegetables, fruits; beef, milk.
Agriculture: 3.9% of GDP and 7.9% of the labor force.
Internet: Code: .ru; 14.865 million (2012) hosts and 40.853 million (2009) users.
Source: CIA World Factbook