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


07 November 2012

USDA GAIN: Russian Federation Grain and Feed - November UpdateUSDA GAIN: Russian Federation Grain and Feed - November Update

With the wheat harvesting ending in the Urals and Siberia, and continued poor yields from these areas, FAS/Moscow has lowered the estimate for wheat production in Russia by 1 million metric tons (MMT) to 39 MMT, compared to over 56 MMT in 2011. As a result the total grain crop forecast is also lowered by 1 MMT to 71 MMT. The forecast for the total crop also includes 14.0 MMT of barley, 7.2 MMT of corn, and 10.5 MMT of other grains and pulses, such as rye, oats, rice, millet, buckwheat, peas, chick peas, and beans. Grain exports slowed in October due to increasing domestic grain (especially wheat) prices, and are expected to drop sharply in November. Despite this slowdown, FAS/Moscow increased the wheat export estimate for MY 2012/13 by 2 MMT to 10 MMT (compared to 22 MMT in 2011/12) as July-October exports were extremely large and sales have continued. Export forecasts for barley and corn remain at 1.5 MMT each. Grain stocks in Russia are low and as a result domestic grain prices continue to rise. On October 23rd the government began selling grain from the State Intervention Fund to flour and feed millers, and plans to sell up to 110,000 MT of wheat every week.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Production:

Crop 2012

According to the Russian Ministry of Agriculture, on October 23rd Russian farmers harvested 72 million metric tons (MMT) of grain (in bunker weight) from 98 percent of planned harvest area, including 39.6 MMT of wheat from 99 percent of planned wheat harvest area. Compared to 2011, the total grain crop decreased by 23 percent and the wheat crop decreased by 33 percent. The wheat crops in the Urals and in Siberia were hit the hardest by continued dryness throughout the growing season. As of October 23rd, farmers in the Urals finished wheat harvesting and harvested 2.3 MMT in bunker weight, less than half of last year. In Siberia, farmers harvested 97 percent of planned area, and their crop in bunker weight is less than 5.9 MMT, the lowest since the 1960s.

Wheat harvesting has almost completely finished throughout Russia, and the remaining 1 percent of planned harvest area is unlikely to add more than a few hundred thousand tons to the already reported 39.6 MMT in bunker weight. However, very high domestic wheat prices have stimulated farmers to maximize their collection of grain from their fields, and this could add additional wheat to the Russian Ministry of Agriculture’s final wheat crop report. In addition, as the summer of 2012 was very dry in European Russia, the difference between clean weight and bunker weight of grain may be considerably less than in typical years. Given these considerations, FAS/Moscow decreased its wheat crop forecast only by 1 MMT from 40 MMT to 39 MMT. The total grain crop forecast is subsequently lowered by 1 MMT and includes 14.0 MMT of barley, 7.2 MMT of corn, and 10.5 MMT of other grains and pulses, such as rye, oats, rice, millet, buckwheat, peas, chick peas, and beans.

Winter Grain Sowing

High prices have stimulated farmers to increase area sown to winter crops, including winter wheat. Rains and warm weather in most of European Russia allowed sowing in normal conditions, and with adequate soil moisture content. According to Russian officials, area sown to winter crops in the fall 2012 will be higher than last year. As of October 23rd, winter crops were sown on 15.5 million hectares, or 92.3 percent of the 16.7 million hectares total planned winter crops area. On the same date last year winter crops were sown only on 14.9 million hectares. If realized, these 16.7 million hectares of planted area would be a considerable increase from what was planted in 2011. The Russian Hydro-meteorological Center reports that both the weather and soil conditions for winter crops have been normal and favorable so far in most of Russian provinces.

In the Central Federal District farmers finished winter sowing by October 23rd. The sown area is 3.7 million hectares, which is nearly identical to last year. In the Southern and the North Caucasus Federal Districts farmers are finishing sowing winter crops. As of October 23rd, winter crops were sown on 5.25 million hectares in the Southern Federal District and on 1.88 million hectares in the North Caucasus Federal District, compared to 4.84 million hectares and 1.51 million hectares respectively on the same date last year. In the Volga Valley Federal District winter crops were sown on 4.35 million hectares or 85.8 percent of the planned winter crops area, and this is 141,300 hectares less than on the same date last year. In the Urals and Siberia, which are very minor winter crop areas, less winter crops were sown than last year: 41,700 hectares in Ural (compared to 43,600 hectares last year), and 181,900 hectares in Siberia (compared to 211,600 hectares last year).

Trade:

Official data on Russian grain exports in October has not been published yet, but industry analysts report that exports have slowed down compared to September. Media sources refer to the Ministry of Agriculture’s data that in the period October 1st through October 17th Russia exported 1.35 MMT, including 934,900 metric tons (MT) of wheat, 214,900 MT of barley, 153,100 MT of corn, and 45,800 MT of other grains and pulses. Assuming that in the second half of October exports will continue at the same pace as in the first half, Russia’s total grain exports in October are unlikely to exceed 2.5 MMT (compared to 3.26 MMT in September), and wheat exports may not exceed 1.7 MMT. Based on these calculations, the total grain exports in July – October may reach 10.5 MMT, including 8.0 MMT of wheat. Some industry analysts report that exports slowed down further in the second half of October, and the total exports in July – October will be only 10.2 – 10.3 MMT. Russian Grain Union experts forecast that in November grain exports may decrease to only 1.0 – 1.2 MMT, and almost completely cease in December 2012 – February 2013 to be renewed only in March 2013. However, at the last Egyptian GASC tender held October 31st, Russia sold another 120,000 MT of wheat delivery December 21st-31st. It shows that some Russian traders might have already accumulated wheat for continued exports in November and December and despite increased domestic prices may export another 2.0 MMT in November 2012 – June 2013 to make the total 10 MMT wheat exports in MY 2012/13.

The company Rusagrotrans, a major Russian railroad shipper of grain, also reports decreased demand for grain rail cars. Despite the reorientation of grain shipments from export to supplying domestic needs, Rusagrotrans reports that 4,000 grain rail cars are either lying unused or being repurposed. According to industry analysts, the railway shipping companies already began switching from transporting grain to transporting other cargoes, such as construction materials.

FAS/Moscow forecasts Russian grain exports in MY 2012/13 at 13.7 MMT, including 10.0 MMT of wheat, 1.5 MMT of barley, 1.5 MMT of corn, and 0.7 MMT of other grains and pulses. Russia’s total grain imports forecast is 1.8 MMT, including 1.0 MMT of wheat, 0.4 MMT of barley (malting quality), 0.1 MMT of corn, and 0.3 MMT of other grains and pulses.

Stocks:

According to Russian State Statistical Service (Rosstat), as of October 1st, Russian grain stocks increased compared to September 1st by 3 percent to 35.79 MMT. However, these stocks were 27 percent less than on October 1, 2011, and the gap between monthly stock levels in 2012 and 2011 actually increased. Grain stocks in the Southern Federal District increased from last month by only 1 percent, and this increase may be attributed to rice and corn crop harvested in September, while in the North Caucasus Federal District, where farmers do not produce these crops, stocks dropped by 9 percent from September 1, 2012. On October 1st, 2012, the total grain stocks in the Southern and North Caucasus Federal Districts, Russia’s major exporting districts, were already at 9.3 MMT, a level which in the previous two years stocks fell to only in January.

Policy:

The Russian Government started selling grain from the State Intervention Fund on October 23rd [Note for more information on the intervention plan see GAIN report Russia to Begin Selling Grain from the State Grain Intervention Fund _ Moscow _ Russian Federation _ 10/17/2012]. In course of the first four days of interventions (October 23rd, 24th, 30th and 31st) they sold 189,924 MT of wheat or 86 percent of the 220,000 MT offered for sale for these four days. This includes 157,139 MT of Class 3 milling wheat and 32,785 MT of Class 4 milling wheat. The starting price (minimum price) for milling wheat Class 3 is 7,600 rubles ($245) per MT, and 7,200 rubles ($232) per MT for Class 3 milling wheat. The volumes of wheat sold decreased on the second day of sales, but recovered on subsequent day of interventions. The change in volume sold by day was clearly influenced by the changes in pricing of the intervention grain (Chart 4). The average price of 1 MT of Class 3 milling wheat dropped from 7,857 rubles ($254) on the first day to 7,719 ($248) rubles on the second day, but then recovered and increased to 7,987 rubles ($255) on the fourth day of interventions.

Industry analysts report that these interventions may quiet wheat prices in Ural and Siberia but are unlikely to influence prices in the European Russia. However, at the end of October the Ministry of Agriculture ordered intervention sales extended to include European Russia. Beginning November 6th wheat will be sold from all elevators across the country that keep intervention grain, including those located in European Russia, to flour and feed millers throughout Russia. Additionally, along with wheat from the 2008 crop, wheat from the 2005 and 2009 crops will also now be included in intervention sales. The reason for this decision might be the relatively weak demand in Urals and Siberia for this intervention grain, and the increasing complaints of flour millers in European Russia. This extension of intervention wheat sales to European Russia may be atemporary solution by the Russian Government against increasing milling wheat prices.

Marketing:

Domestic grain prices have continued rising in the second half of October, but the pace has slowed down (Charts 6). Milling wheat prices in Ural and Siberia equaled those in the Central Russia, but still were below wheat prices in the Southern European Russia (Chart 7).

[For graphs and tables, please download the document]

November 2012

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