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Russia's self sufficiency desires

The Russian government is making considerable steps to increase the country's self sufficiency for almost all agricultural goods. This includes rice, all grains and livestock, a report from Companies and Markets shows.

Although the country will suffer continued inefficient production, as well as the after effects of potentially the country's worst ever drought, the government maintains its desire for self-sufficiency in poultry and the world's largest wheat exporter.
 
However, much of this production growth will need to come from government initiatives, as Russia's declining population and existing high consumption rates in dairy and grains will limit consumption growth over the medium term.
 
Key trends
  • Corn consumption growth to 2015: 49% to 6.6mn tonnes. Demand for growth will almost exclusively be fuelled by production in the domestic pork and poultry sectors, which the government is keen on expanding for self-sufficiency purposes.
  • Rice production growth to 2014/15: 41% to 857,000 tonnes. This growth will largely come from an increase in area planted as the government continues trying to achieve self-sufficiency.
  • Dairy consumption growth to 2015: 1% to 12mn tonnes. Milk consumption in Russia is fairly well-established and with the decreasing population little direct consumption growth should occur.
  • 2010 Real GDP Growth: 4.1% (up from -7.9% in 2009; predicted to average 4.3% from 2010 until 2015).
  • Food Price Inflation: 8.7% year-on-year in September 2010 (down from 9.9% y-o-y in July 2009).
Industry developments
On January 30 2010, President Medvedev signed the 'Food Security Doctrine', aimed at ensuring Russia reaches 85% self-sufficiency in meat and poultry by 2020 and is predicated on significant production growth over the long term.
 
However, one of the significant downside production risks is rising livestock feed prices, particularly corn and soybeans.
 
Since Russia does not grow a significant surplus of either good, it is vulnerable to global price increases, particularly if it must import due to bad harvests.
 
Loss of trading partners
As Russia grapples with what is now considered the worst drought on record, Prime Minister Vladimir Putin announced that the country's wheat export ban, which came into effect on August 15, could last well beyond the initial December 2010 expiry date.
 
While the significant difficulties the weather has created for Russian production is recognised, the government is arguably damaging the sector further by cancelling contracts.
 
By negating deals that are already in place because of the recent ban, Russia risks losing partners to a multitude of other wheat exporters, including Australia, Canada, the EU and Argentina.
 
Fewer hectares planted
There appears to be a consensus that plantings for Russia's winter wheat crop will be about 15mn hectares in 2011/12.
 
The 15mn hectares would represent a decrease from an 18mn hectare planting average for the winter crop over the last decade.
 
The reason for the potential decrease is that farmers are worried about ground conditions, as the soil in many growing regions is still relatively infertile.
 
Russian farmers could try to compensate for lower winter wheat plantings by increasing spring wheat plantings.
 
However, yields in the spring crop are roughly 17% lower than the winter crop, which has ultimately led to forecast only a 13% rebound in wheat production to 60mn tonnes in 2011/12.
 
The full report ($548, €401, electronic version) is available from Companiesandmarkets

 

Dick Ziggers

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