Russian Grain Production Rising, says US Report

US - Grain prices in Russia rose sharply in February, says a monthly GAIN update from the US Department of Agriculture.
calendar icon 5 March 2008
clock icon 3 minute read
In spite of an imposition of prohibitive export tariffs, which virtually halted trade in wheat and barley, prices increased and preliminary forecasts of the 2008 crop indicate both sown area and use of inputs will also rise, and potentially boost grain output above the 2007 level.

Flour exports surged in response to the shutdown in wheat export sales. Minister of Agriculture Aleksey Gordeyev announced grain exports could reach 15 million metric tonnes for the period 1 July 2007 to 1 July 2008, although an anticipated extension of the prohibitive export tariff on wheat and barley should preclude reaching that level.

Grain stocks on large grain farms fell more rapidly in January than a year earlier, but due to the larger 2007 harvest remained near year-previous levels.

Production Stucture

The Russian Grain Union predicts a structure of grain plantings as follows: 55 per cent wheat, six per cent rye, 21.8 per cent barley, 6.9 per cent oats, 2.8 per cent corn, and notes that Russia is trending toward a wheat/barley duo-culture.

Grain production in 2008 will be influenced by the following factors:
  • high returns on sunflower will result in expansion of sunflower production, putting downward pressure on other summer crops;
  • high returns on wheat and barley led to the highest area planted to winter grains since 2002 (15.64 mha less 0.90 mha winterkill to date), and will result in both more area planted to spring wheat and in higher use of chemicals and fertilizer (i.e., potentially higher yields), but this expansion and intensification will be dampened slightly by Russian government restrictions on wheat and barley exports that are lowering price expectations, as well as fertilizer costs rising faster than grain prices;
  • expansion of wheat and oilseed acreage will come at the expense of less profitable crops, e.g., sugar beets;
  • high fuel costs are accelerating adoption of minimum tillage practices, and this is helping to stabilize yields, mainly due to better moisture retention;
  • high prices received for the 2007 crop improved finances on large farms, creating an opportunity to upgrade production technologies;
  • lower than usual winterkill due to the mild winter means the expanded winter wheat and barley area will survive with potential better yields than in 2007.
In other words, assuming normal weather conditions this season, wheat and barley production is likely to increase, based on both greater area and higher input use, but would have been higher still if not for the export restrictions.

Further Reading

- To read the full report click here.
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