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Russian Federation Grain and Feed February Monthly Update

Prepared by:
Yelena Vassilieva, Kimberly Svec

Report Highlights:
According to the Russian State Statistical Service, grain production in 2007 was 81.8 million metric tons (mmt), 4 percent higher than 2006, including 49.4 mmt of wheat, 15.6 mmt of barley, 3.9 mmt of rye, 5.4 mmt of oats, 3.9 mmt of corn, 0.4 mmt of millet, 1.0 mmt of buckwheat, 0.7 mmt of rice, and 1.3 mmt of legumes. MY 2007 grain exports are forecast at 13.7 mmt, as Russia already exported nearly 13.0 mmt by the end of January 2008. Milling wheat and flour prices increased rapidly in January.

Executive Summary

On January 29, 2008, the State Statistical Service of the Russian Federation published official data on grain production in 2007. The total grain crop is 81.8 million metric tons (mmt), 4 percent more than in 2006, including 49.4 mmt of wheat, 15.6 mmt of barley, 3.9 mmt of rye, 5.4 mmt of oats, 3.9 mmt of corn, 0.4 mmt of millet, 1.0 mmt of buckwheat, 0.7 mmt of rice, and 1.3 mmt of legumes. From July 2007 through January 2008, Russia exported 13.0 mmt of grain and flour (in grain equivalent). Exports of wheat and barley will not continue February — April 2008 due to prohibitive export duties on these crops. However, export of wheat flour will continue, and may add another 0.4 mmt (in grain equivalent) to total MY 2007 grain exports. Given that Russia also increased exports of rye, the total MY 2008 grain exports is forecast at 13.7 mmt. Top quality milling wheat (class 3) prices increased from 6,285 rubles (US$258) per metric ton in the end of December to 6,790 (US$278) rubles per metric ton in the end of January 2008 (European Russia) despite continued grain interventions. From October 29, 2007 to January 29, 2008, 544,852 metric tons of class 3 wheat (or 43 percent of the intervention stock) and 53,531 metric tons of class 4 wheat (35 percent of intervention stock) were sold, but these sales did not curb market prices of milling wheat and wheat flour. According to millers, the wheat flour price increased in January by 8 percent since the end of December 2007, and may stimulate further increase in bread prices. On January 31, major Russian producers and retailers will sign an agreement to extend price freezing on staple food products, including wheat and rye bread, until May 1, 2008.

The State Statistics Service also reported on economic growth in 2007. Gross domestic product grew by an annual 8.1 percent in 2007, exceeding the government's forecast and registering the fastest growth rate since 2000. Russia has entered its 10th consecutive year of growth. The average wage increased an annual 16.2 percent in 2007, reaching 18,467 rubles ($754) per month in December while retail sales grew 15.2 percent. Disposable income increased 10.4 percent last year, according to the State Statistics Service.

Official Data on 2007 Grain Crop

On January 29, 2008, the State Statistical Service of the Russian Federation published official data on 2007 grain production. The total grain crop is 81.8 mmt, 4 percent more than in 2006. Wheat production increased to 49.4 mmt, 9.7 percent growth from 2006. Rye crop is 3.9 mmt, 32 percent more than in 2006. Production of oats increased by 10.8 percent to 5.4 mmt, corn production increased to 3.9 mmt (up 7.6 percent from last year), production of buckwheat and rice increased to 1.0 mmt and 709,000 metric tons, respectively (16 percent and 3 percent increase). Meanwhile, barley production dropped by 13.8 percent to 15.6 mmt, and millet and legumes production plummeted by 30 percent and 26 percent to 421,000 metric tons and 1.3 mmt respectively. Agricultural enterprises produced 78.5 percent of all grain, and private farms-peasants accounted for 20.2 percent of all grain.

Winter grain is sown to 15.0 million hectares, a 15-percent increase from previous year, including 600,000 hectares of winter barley. January frost spells in the Sothern Federal District without adequate snow cover damaged plants on some fields, but the result of the damage is still difficult to estimate. Winter grain survival is still good in the Ural Federal District and in Siberia Federal District, with adequate snow cover.

Trade

Experts estimate Russia's wheat exports from July through December 2007 at 10.56 mmt, and forecast wheat exports in January at 1.1- 1.2 mmt. Given that wheat flour exports in July — December reached 187,600 metric tons or 260,000 metric tons in grain equivalent (up 4 percent from total wheat flour exports in MY 2006), and will continue in January and February, total wheat exports in MY 2007 may exceed 12.5 mmt despite a prohibitive wheat and meslin export tariff (40 percent ad valorem, but not less than 105 Euro per metric ton), effective January 28, 2008 to April 30, 2008.

From July through January, Russia exported 1.0 mmt of barley, but barley exports plummeted in December due to the imposition of a prohibitive export tariff (30 percent ad valorem but not less than 70 Euro per metric ton), effective November 12, 2007 to April 30, 2008. Given the small barley crop, total barley exports in MY 2007 will should not exceed 1.1 mmt.

In July -December 2007, Russia exported 106,140 metric tons of rye (4.5 times more than in MY 2006). Russia's exports of corn in October — December 2007 were 23,545 metric tons, less than 50 percent of October — December 2006 exports.

Thus, despite prohibitive export tariffs on barley and wheat and meslin, Russia's total MY 2007 grain exports may exceed 13.7 mmt.

In July — December 2007, Russia imported 212,600 metric tons of wheat and flour (in grain equivalent), 89,000 metric tons of barley, and 128,301 metric tons of rice. Corn imports in October — December 2007 were 13,400 metric tons.

Policy

The Russian Government continues grain interventions, and by January 30, 2008 has sold 544,852 metric tons of class 3 wheat (or 43 percent of the intervention stock) and 53,531 metric tons of class 4 wheat (35 percent of intervention stock). At the last intervention session held on January 29, 2008, the average price of class 3 wheat was 6,149 rubles (US$252) per metric ton, 20 percent higher than at the session held on December 4, 2007, and the average price of class 4 wheat was 5,321 rubles (US$218) per metric ton, a 13-percent increase from December 11, 2007 session, when sales of class 4 wheat began. The quantity of wheat sold and terms of interventions sales have had minimal impact on domestic wheat prices, and in January 2008 prices of wheat began rising again. Prices of top quality milling wheat (class 3) increased in European Russia from 6,285 rubles (US$258) on December 21, 2007 to 6,790 rubles (US$278) per metric ton as of the end of January 2008. Prices of class 4 wheat increased from 6,080 rubles (US$249) to 6,290 rubles (US$258) per metric ton from December 21, 2007 to January 17, 2008. According to millers, wheat flour prices continue to rise, increasing by 8 percent in January, thus stimulating an increase in bread and bakery products' prices. On January 31, major Russian producers and retailers will sign an agreement to extend price freezing on staple food products, including wheat and rye bread, until May 1, 2008.

Date:  06.02.2008

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