Focus on Russia

by World Grain Staff
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Russia, the largest country in the world with a huge area that spreads from Europe to the Far East, has been through huge changes since the end of the Soviet Union, becoming a fast-growing economy based on the supply of energy and raw materials.

It has also become an important grain supplier, but a need for improved infrastructure remains a limiting factor.

The initial effect of the transition from a planned to a market economy during the 1990s was a sharp fall in agricultural output. Meat production, in particular, plunged. The Soviet government had expanded the livestock sector to the point where it was obliged to import grain to feed all the animals.

When the subsidies were taken away from the livestock sector, it shrank, triggering a sharp fall in demand for animal feed. "Russian grain production fell, while imports of grain and oilseed products largely ended," according to a report published in

May by the USDA’s Economic Research Service on Russia’s rising food imports. "During the 2000s, Russia has, in fact, become a major

grain exporter, despite grain output in the decade being almost 20% lower than at the end of the Soviet period," it said, noting that Russia’s average annual grain output during 2001-08 was 83 million tonnes, compared with 103 million during 1987-90. "Rather than importing a lot of grain, soybeans and soybean meal to support a large and inefficient livestock sector, Russia is now importing much more meat and other livestock products and exporting grain," it said.

The International Grains Council (IGC) puts total Russian grain output for 2009-10 at 86.5 million tonnes, compared with 105.8 million the year before. Its wheat crop is set to fall to 55 million tonnes from 63.7 million, and its barley crop is forecast to fall to 17 million tonnes from 23.1 million. Production of oats will be 5 million tonnes, according to the IGC, down from 5.6 million. The rye crop is due to fall to 3.6 million tonnes from 4.5 million. Russia is due to import 600,000 tonnes in 2009-10, compared with 300,000 the year before. Its exports will fall to 17.4 million tonnes from 20.3 million.

Wheat imports will rise to 200,000 tonnes in 2009-10, from 100,000, while wheat exports are put at 15.5 million tonnes, down from 17 million.

Maize imports are predicted to rise to 300,000 tonnes from 200,000, with barley imports unchanged at 100,000. Barley exports will fall to 1.8 million tonnes from 2.2 million.

OILSEEDS

According to the USDA, Russia’s production of the main oilseeds, (sunflowerseed, soybeans and rapeseed) is forecast at 8.5 million tonnes in 2009. The figure is dominated by 7 million tonnes of sunflowerseed. Domestic oilseed crushing capacity will reach 8.1 million tonnes in the 2009 marketing year. An attaché report on oilseeds and products put production of meals at 3.8 million tonnes and production of vegetable oil at 3.1 million tonnes. "Exports of oilseeds will remain low due to export tariffs and high domestic demand for oilseeds," it said. "Imports of meal will be limited to (570,000) tonnes due to the devaluated ruble and the new 5% import tariff on soybean meal. Exports of meal and oil will increase due to increased crushing and the weak ruble."

Soybean imports are predicted at 630,000 tonnes. "Imports of soybeans for crushing are stimulated by the recent construction of the major soybean crushing plant in Kaliningrad," the report said. Sodrugestvo, the company which owns the operation in Russia’s Baltic enclave, opened the second of its two Kaliningrad plants on Dec. 10, 2008, bringing total crushing capacity to 1.1 million tonnes of soybeans a year.

CREDIT CRUNCH

The USDA’s experts predict a limited effect on agriculture from the credit crunch. "Due to the financial crisis and the possible continued decrease in grain prices in 2009, Russian farmers will not have the financing required to increase grain production and invest in improved technologies," their annual report on the grains sector said. "However, according to experts, grain producers are still in better financial situation than livestock farms, because they had benefitted from high grain prices in 2007-2008. Thus, financing of grain production, sowing and harvesting in 2009 will not be a serious problem, but the situation may be aggravated by the beginning of winter grain sowing in September/October 2009."

WHEAT FLOUR

Russia is a major exporter of wheat flour. According to the IGC, exports for 2008-09 will total 600,000 tonnes, up from 550,000 the year before. The Russian Union of Flour and Grain Mills has 198 member organizations, which produced around 8 million tonnes of flour in 2008, according to the Union’s website. That figure represents 85% of the total production of flour in Russia, it said. According to Russia’s state statistics service, Rosstat, in January-April of 2009 flour production in Russia totaled 3.3 million tonnes, an increase of 4.7% compared to the same period the previous year. In 2008, Russia produced 10.1 million tonnes of flour, down 1.5% on the previous year’s total, according to figures published by the news organization APK Inform.

GOVERNMENT IN AGRICULTURE

The government has moved to take a bigger role in agriculture. On March 20, 2009, President Dmitry Medvedev signed a decree which established a federal grain company. "The current state entity responsible for managing federal grain procurement and programs will be expanded to include shares from 31 state grain companies," Yelena Vassilieva of the U.S. embassy in Moscow said in a report. "The main priorities for this company will be to increase purchasing and selling of grain on the domestic market, to increase grain exports, to modernize and to construct new elevators and port terminals."

The new organization will be called the "United Grain Company," and it will include the agency that currently regulates the grain market and shares of 31 additional state entities which include grain processing, handling and storing enterprises, and three major port elevators.

Russia underlined its ambitions for a bigger role in world grain trade at the World Grain Forum, which was held in St. Petersburg, Russia in June. The importance for the sector was demonstrated by the presence of Medvedev. "We are preparing to strengthen our position on the world grain market and to put financial and organizational support behind it," he told the conference, according to remarks reported by the Reuters news agency. "We should work out a mechanism that can regulate supply and demand imbalances on the world grain market."

However, he attacked limits on trade. "Excessive protectionism is damaging for sustainable development, including in the agricultural sector, though it is flourishing and often leads to speculation on the grain market," he said.

A report from the Moscow Times identified a target for Russian impatience over trade barriers. "Now, we fight to the bitter end for the right to export to the E.U. with our Ukrainian and Kazakh colleagues," it quoted Arkady Zlochevskiy, president of the Russian Grain Union, as saying. "We are not allowed in the European market, while Russia is open for the local producers." Zlochevskiy said the E.U. has a 2.7-million-tonne import quota for Eastern European nations.

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