Russia Grain and Feed November Monthly Update 2007
Grain and Feed November Monthly Update 2007
Since September's report, the wheat estimate has been raised by 3.1 mmt due to favorable weather and minimum harvest losses in Siberia. The barley forecast was lowered by 900,000 metric tons based on low reported yields. The corn estimate is lowered by 100,000 metric tons to 3.7 mmt due to low yields, principally caused by drought in the Southern Federal District. However, corn production is 100,000 metric tons higher than last year due to a significant increase in planted area.
In spite of high domestic grain prices, and temporary export duties on wheat and barley, the total grain export forecast for the 2007/08 marketing year remains 12.0 mmt, including 11.0 mmt of wheat and 900,000 metric tons of barley. Most of this grain will be exported by the end of CY 2007 because traders expect prohibitive wheat export tariffs to be imposed in January or February, 2008, and the 30 percent export tariff on barley, effective November 12, will stop barley exports.
Grain prices rose from June through September, and stabilized at a high level in October. Grain product prices jumped in August, and in October the Government undertook several emergency measures to curb growth of both consumer bread prices and grain prices: a 10-percent wheat and 30-percent barley export tariff starting November 12, milling wheat sales from the state intervention fund, and federal and regional administrative measures to freeze consumer prices of «social» products, including certain types of bread. These measures will not drastically change Russia's grain market, including Russia's exports and domestic grain consumption, as the total grain crop is enough to meet present demand for grain. However, exports will be somewhat lower than they would have been otherwise, and wheat product disappearance will increase slightly due to inflation-induced consumer hoarding of wheat products.
Last month the Russian Ministry of Agriculture increased its grain crop estimate to 80 mmt based on a reported «bunker weight» grain production figure of 86 mmt as of October 10, 2007. Official data on the final outturn of wheat, barley and corn are not yet available. Experts' estimates of the wheat crop vary from 47.5 to 48.5 mmt, barley from 16.5 to 17.3 mmt, and corn from 3.8 to 4.0 mmt. Reported data on the harvest progress in agricultural enterprises as of October 30 is the following: total grain 65.4 mmt, including wheat 40.4 mmt, barley 13.2 mmt, and corn 2.6 mmt. In 2006 agricultural enterprises produced 78.5 percent of Russia's grain, including 78.7 percent of wheat, 77.8 percent of barley, and 66.5 percent of corn. On the assumption that the share of agricultural enterprises in grain production remains unchanged in 2007, the total bunker-weight grain crop as of October 23, 2007, may be estimated at 83.5 mmt, including wheat 51.2 mmt (approximately 48.2 mmt clean weight), and barley 17.0 mmt (approximately 16.2 in clean weight), and 3.9 mmt of corn. The corn harvest is still underway, and the final bunker-weight corn crop may exceed 4.0 mmt. On the assumption that «peasant» farms will take better care of the valuable barley crop than agricultural enterprises, and that their share in barley production will increase, we estimate the barley crop in 2007 at 16.4 mmt, while wheat production is pegged at 48.1 mmt.
Drought in the Southern Federal District and parts of the Volga Valley, particularly in Rostov Oblast, hurt winter grain yields. This was reportedly more than offset by better spring grain yields in western Siberia and less drought-afflicted areas of the Volga Valley.
Winter Sowing Progress
By November 1, 2007, winter grain sowing was almost completed. Sources report that the total winter grain area is 5 to 6 percent greater than in Fall 2006, and that October rains in European Russia improved soil moisture. In agricultural enterprises winter grains were sown on 12.3 million hectares by October 23, an 11.2 percent increase from last year's figure.
There are no official data on current grain exports from Russia. Sources report that Russia's grain exports in July- September were 4.8 mmt, including 4.25 mmt of wheat and 540,000 metric tons of barley. October grain export estimates vary from 2.3 mmt (MinAg's estimate) to 2.5 mmt (Russian Grain Union's estimate). From July through October, 2007, Russia exported more than 7 mmt of grain, mostly wheat. Based on estimates of export contracts outstanding and availability of railcars, experts forecast grain exports in November to decrease to 1.5 mmt, and in December to 1.0 mmt. Thus, by end of Calendar Year 2007 Russia's grain exports should reach 9.5 mmt 10.0 mmt.
Traders anticipate the already announced wheat export tariff of 10%, set to go into effect November 12, will be raised to a prohibitive level (from 30 to 50 percent, perhaps) effective sometime after January 1, 2008. If this happens, exports in similar volumes will restart only in April or May, 2008, in preparation for harvesting of the new crop, which will bring wheat exports for the Marketing Year 2007/2008 to about 11 mmt.
Barley exports for July October are estimated at 750,000 metric tons, but will hardly exceed 0.9 mmt in MY 2007/08. Barley supplies are tight on the domestic market, and the export tariff of 30 percent, but not less than 70 Euro per metric ton, is prohibitive.
In European Russia, class 3 wheat prices reached 6,000 rubles per metric ton by the end of September, and stabilized at this level in September and October. Class 4 wheat prices approached class 3 wheat prices, but also stabilized in October. Regional prices of wheat (class 3) in European Russia vary from an average in the range of 5,900 6,000 rubles in the Volga Valley Federal District, to 6,300 6,600 rubles per metric ton in the Southern Federal District. Sources report that wheat prices stabilized in October across all internal markets, and in the last week of October even tended to decline slowly.