Good grain harvest may bring a price relief

12-12-2019 | |
Photo: EPA
Photo: EPA

In 2019, Russia would be able to harvest 121 million tonnes of grain, which would make the second biggest harvest ever, Russian Agricultural Minister Dmitry Patrushev said, speaking during a press-conference in Moscow, December 6.

This is a very good result giving the bad weather conditions at nearly every third Russian region this year, he added. Russian Grain Union earlier forecasted that the domestic grain production this year would reach 123 million tonnes, 9% up as compared to the previous year. In 2019, Russia could harvest 77 million tonnes of wheat, 21 million tonnes of barley and 14.4 million tonnes of corn, the Grain Union forecasted.

In 2019, Russia would export 46 million tonnes of grain – one of the highest levels seen ever, Alexander Korbut, vice president of the Grain Union said at a separate press-conference in Moscow in early December.

Cheap grain is needed

Good harvest could be an important factor for the Russian feed industry, where wholesale prices are currently on the rise. Between mid-2018 and mid-2019 the average wholesale price of feed in Russia jumped by 24% to the all-time record of Rub17,800 ($280) per tonne, Russian State Statistical Service Rosstat estimated. The prices were the highest in European Russia and in southern regions and the lowest in Siberia, Rosstat said. As soon as the grain of the 2019 harvesting campaign is available on the market the prices could fall by 5% to 7%, Valery Afanasyev, chairman of the Russian Union of Feed Producers told local newspaper Agroinvestor. The same thing happened in 2017, when the harvest was the highest ever, and this pushed down the feed prices from 10% to 12%, Afanasyev added. The high feed prices have already started to take their toll on the market, Russian Grain Union said in a statement earlier this year. The domestic demand for grain could shrink in 2020 by 1.5 million tonnes because of the week demand from feed mills, the Grain Union said.

No clarity on the horizon

Feed prices in Russia are likely to keep growing, because of the expensive grain and the VAT hike for the Russian feed additives importers adopted by the Russian government earlier this year, according to Sergey Mikhnyuk, executive director of the Russian National Feed Union. In a decree released in late September 2019, Russian government obliged feed additives importers to pay additional Rub5 billion ($120 million) for the feed additives imported into the country under the so-called preferential tax regime during the previous three years. This decision prompted the price turbulence on the Russian feed additives market.

The price of feed has been in the spotlight of the Russian meat industry during the whole year. Russian Union of Poultry Producers earlier this year forecasted that every second poultry farm in the country could become loss-making this year with the sharp rise in feed prices and a constant fall in wholesale poultry prices were the main factors to blame.

Vladislav Vorotnikov Eastern European correspondent