Highlights

Assuming average weather conditions during the growing season, FAS/Moscow forecasts Russia’s 2017 grain and pulses production at 110 million metric tons (MMT), a seven percent decrease from the 2016 crop but still higher than the previous five-year average of 98 MMT. The MY 2017/18 forecast, by crop, is: wheat – 66 MMT (nine percent or 6.5 MMT less than last year), barley – 16 MMT (1.5 MMT less than last year), corn – 15.3 MMT (the same as last year), rye – 2.6 MMT, oats – 4.5 MMT, milled rice – 715 thousand metric tons (TMT) (1.1 MMT in rough weight), millet - 550 TMT, and approximately 4.5 MMT of other grains and pulses. Grain exports for MY 2017/18 are forecast at 37.7 MMT, or 2.0 MMT more than the estimated 35.7 MMT of exports in 2016/17. The forecast for exports, by crop, are: 28 MMT of wheat, 3.3 MMT of barley, 5.4 MMT of corn, 180 TMT of milled rice, and approximately 860 TMT of other grains and pulses.

Executive Summary

In 2016 weather conditions were extremely favorable for grain crops resulting in the second highest grain crop in Russian history. This was one of the major factors contributing to record yields for the major grains. FAS/Moscow assumes that in 2017 weather will be closer to the average, and forecasts Russia’s 2017 grain and pulses production at 110 million metric tons (MMT), a seven percent decrease from the 2016 crop but higher than the previous five-year average of 98 MMT. Overall the MY 2017/18 forecast, by crop, is wheat – 66 MMT (nine percent, or 6.5 MMT, lower than last year but still higher than the five-year average of 56.5 MMT), barley – 16 MMT (1.5 MMT lower than last year and 0.8 MMT lower than the five-year average of 16.8 MMT), corn – 15.3 MMT (the same as last year, and higher than the five-year average of 11.9 MMT), rye – 2.6 MMT, oats – 4.5 MMT, milled rice – 715 thousand metric tons (TMT) (1.1 MMT in rough weight), 550 TMT of millet, and approximately 4.5 MMT of other grains and pulses.

The grain production forecast is very preliminary, as most spring grains and pulses (which over the last five years, on average accounted for 59 percent of total grains) will not be planted for a number of weeks. Based on the estimates and forecasts of the Russian Ministry of Agriculture, winter grains sown area for the 2017 crop is 16.92 million hectares, and the area to be sown for spring grains and pulses is 31.13 million hectares. Farmers planted a little more area to winter grains for the 2017 crop than for the 2016 crop, and so far the condition of winter grains in most areas is better than the five-year average. However, some industry analysts consider that as of the end of March, 2017, the condition of winter grains is worse than last year. Moreover, winter grains may be affected by weather during the end of April and May. Based on trend lines, FAS/Moscow forecasts winter wheat and barley yields slightly worse than last year. Although the 2017 spring planting began earlier than last year, the speed of spring sowing decreased. As of April 10, 2017 farmers had planted spring grains and pulses on 1.42 million hectares compared with 1.51 million hectares on April 10, 2016. FAS/Moscow forecasts a decrease in grain production in 2017, compared with 2016, based primarily on the following factors:

- The Russian grain crop is still very dependent on weather, and the probability of very favorable weather in 2017, for a third year in a row, is low. Weather conditions and yields of major grain crops are more likely to be close to average;

- Grain prices in spring 2017 are lower than in spring 2016, and continue to decline because of large carry-over stocks and stagnant domestic and foreign demand for grain. Stronger than last year Ruble also curbs grain exports from Russia. The decreasing grain prices may affect farmers’ spring grains planting decisions;

- Prices of major inputs (such as high quality planting seed, chemicals, equipment, fuel, and lubricants), have increased y-o-y. Only fertilizer prices were lower at the beginning of the 2017 spring sowing season than last year. However, the overall cost of the 2017 spring sowing, according to the Ministry of Agriculture, is higher than the cost of the 2016 spring sowing.

- Federal budget supported producers of agricultural crops primarily through the decoupled support, which has decreased in 2017 y-o-y.

FAS/Moscow forecasts Russia’s total MY 2017/18 grain consumption at 75 MMT. This forecast is 1.1 MMT lower than the estimated total grain consumption in MY 2016/17. The consumption forecast includes 38.7 MMT of Feed and Residual (0.9 MMT lower than the estimated consumption in MY 2016/17) and 36.2 MMT of Food, Seed and Industrial (FSI) Consumption (0.2 MMT lower than in MY 2016/17). Post decreased the forecast based on several considerations:

- Post assumes that MY 2016/17 consumption under the category “Feed and Residual” includes a higher than usual “residual.” This unusually large residual is due to the significant quantity of grain, especially wheat, from last year that is still stored on farms. This grain stored from the previous season is likely to deteriorate in quality and, possibly, will be lost. Assuming that the 2017/18 grain crop is smaller, as forecast, grain losses, or “residual” will also decrease, while “Feed” consumption will remain at the same level as in MY 2016/17.

- The forecasted decrease in FSI consumption is based on the assumption that Russian production and food consumption of buckwheat that is reflected in the category of “Other” will be lower than in MY 2016/17. In 2016/17 due to the bumper buckwheat crop and lower prices, consumption of this cereal increased. FSI consumption forecast of wheat, barley, corn, oats, millet and rice is the same as estimated consumption of these grains in MY 2016/17.

MY 2016/17 grain exports are forecast at 37.7 MMT or 2.0 MMT more than the estimated 35.7 MMT of exports in 2016/17. Grains are forecast at 36.9 MMT that is 2.1 MMT more than the estimated 34.8 MMT exports in MY 2016/17. The increase is based on assumption that traders and Russian government will continue developing foreign markets for Russian grain, the Ruble will be less volatile, and domestic grain prices, in Rubles, will be lower y-o-y than on average in MY 2016/17, stimulating exports. The export forecast includes 28 MMT of wheat (1.5 MMT more than wheat exports estimate for 2016/17), 3.3 MMT of barley (0.3 MMT more than the estimated exports in 2016/17), 5.4 MMT of corn (0.3 MMT more than in MY 2016/17), 180 thousand metric tons (TMT) of milled rice (the same as in MY 2016/17), and approximately 860 TMT of other grains and pulses (estimate for MY 2016/17 is 925 TMT). The category “Other Grain and Pulses” includes primarily exports of pulses.

Post forecasts carry-over grain stocks will decrease to 13.4 MMT by the end of MY 2017/18 from the estimated 15.1 MMT at the beginning of the 2017/18 marketing year. This is based on the forecast that the MY 2017/18 grain crop is lower and exports higher than in MY 2016/17. Post estimates for MY 2016/17 exports of wheat, barley and corn are lower than official USDA estimates by 1.5 MMT, 0.4 MMT and 0.2 MMT, respectively. Post’s lower estimates are based on the actual exports of these crops during the period from July 2016 through March 2017 and additional factors. Given that Post’s estimates for exports of wheat, barley and corn are lower than the official USDA estimates, Post’s estimates for stocks for each of these crops at the end of MY 2016/17 are higher than the official USDA estimate.

Commodities:

Wheat. Barley. Corn. Rye. Oats. Rice, Milled. Millet

Production:

2017 Forecast

The Russian grain crop still depends primarily on weather conditions. Post forecasts that in 2017 weather will be closer to average and forecasts Russia’s 2017 total grain and pulse production at 110 million metric tons (MMT), a seven percent decrease from the 2016 crop. The 2016 grain crop was the second largest crop in Russian history, following the 1978 grain crop. This extraordinary crop can largely be attributable to unusually favorable weather, extremely high yields for most of the grain crops, and an increased share of corn. The average yield of corn is two to three times higher than Russia’s yields for other grains. Post’s 2017 grain production forecast of 110 MMT is 12 MMT higher than the previous five-year average of 98 MMT. Overall the MY 2017/18 forecast, by crop, is the following: wheat – 66 MMT (nine percent or 6.5 MMT lower than last year but still higher than the five-year average of 56.5 MMT), barley – 16 MMT (1.5 MMT lower than last year and 0.8 MMT lower than the five-year average of 16.8 MMT), corn – 15.3 MMT (the same as last year, and higher than the five-year average of 11.9 MMT), rye – 2.6 MMT, oats – 4.5 MMT, milled rice – 715 thousand metric tons (TMT) (1.1 MMT in rough weight), 550 TMT of millet, and approximately 4.5 MMT of other grains and pulses.

Post’s forecast is based on yield trends, the condition of winter grain crops, an estimate of spring planting, consideration of the supply of inputs, and financing of spring field works in Russia. Post assumes that weather conditions for the remainder of the growing season will be closer to Russia’s average. Forecasts are very preliminary because the condition of winter grains may be significantly affected by weather changes in late April and May. Moreover, spring sowing has only just begun in the South of European Russia and will begin in late April and May for most other Russian provinces. Weather fluctuations can be very pronounced from year to year and even from province to province. In February 2017, the Ministry of Agriculture forecasted that in 2017 the total area for grains and pulses will be 48.14 thousand hectares, 1.9 percent more than in 2016. The increase reflects an increase in are planted with winter grains, while the planted with spring grain and pulses will be 0.7 percent less than in 2016 (31.01 million hectares compared with 31.22 million hectares in 2016). FAS/Moscow does not forecast any technological improvements in production of any grain crops because of increased cost of inputs, such as seeds, chemicals, fuel and lubricants. Additionally, farmers’ financial constraints will have a negative impact on production. Russia does not permit the planting of GE crops.

The area sown to winter grains for the 2017 crop was 17.36 million hectares, 1.8 million hectares more than winter area sown for the 2016 crop. There are still no data on the winter grain survival area for the 2017 crop. The survival area for the 2016 winter grain crop was (on average for all grain crops) 94 percent of sown area. Without Crimea, winter grains for the 2017 crop were sown on 16.92 million hectares. As of mid-March, 2017, the conditions for vegetation of winter crops in most provinces of the Southern and Central European Russia were favorable. In some provinces, farmers started field works (feeding of winter crops with fertilizer) earlier than last year. In the Asian part of Russia weather, on average, has also been favorable for winter grains, although a significant portion of this area was still covered with snow. As of the beginning of April, 2017, the Ministry of Agriculture has not published any official data on the condition of winter crops. At the same time industry analysts tell that the condition of winter crops may be classified as good to average in most winter grain producing provinces of the Russian Federation. In some Central and Volga Valley provinces the winter grain crop looks a little worse than during the same period in 2016.

Spring grain sowing progress

The Ministry of Agriculture forecasted that area sown to 2017 spring grain and pulses will decrease y-o-y by 0.2 million hectares, to 31.01 million hectares. Reportedly, farmers will decrease area sown to spring wheat, barley, and some other grains and pulses, but increase area sown to corn . Without Crimea, the forecast for spring planting of grain crops is 30.92 million hectares, including 13.56 million hectares of spring wheat, 7.64 million hectares of spring barley and 9.72 million hectares of other spring grains and pulses.

In 2016, the actual sown area was close to MinAg’s plans, but not exactly the same. Moreover, in some cases the decisions made by farmers did not necessarily work in their best interests. For example, farmers planted less area to spring barley than the Ministry forecasted, and additionally, the barley crop was lower in 2016 than in 2015. Planting of the 2017 spring grains started earlier than last year but the speed of planting in the first week of April was slower than last year: As of April 10, 2017, Russian farmers planted spring grain crops on 1.42 million hectares, compared to 1.51 million hectares planted by the same date in 2016.

Russian farmers planted the following spring grains, by crop as of April 10, 2017:

- 130,700 hectares to spring wheat (one percent of the plan, and 49,700 hectares more than on April 10, 2016);

- 754,800 hectares to spring barley (9.9 percent of the plan, and 43,700 hectares less than on the same date in 2016);

- 76,900 hectares to corn (only 2.5 percent to the plan, and 104,000 hectares less than on April 10, 2016). However, corn sowing had just begun when the Ministry released the data.

The Central FD planted the 2017 spring wheat crop faster than last year, while the Southern FD fell behind last year’s pace. Sowing of the barley crop lagged behind last year in almost all federal districts.

Inputs and Financing

Planting seeds:

As of March 9, 2017, Russian farmers had 5.89 MMT of planting seeds of grains and pulses. The conditional seeds comprised 82.5 percent of the total, slightly lower than last year. These data, however, do not include information on planting seeds for corn. The Ministry of Agriculture estimates that 50 to 55 percent of planting seeds for corn are imported, and estimate the import volume for the 2016 crop was 4.0 TMT. Imports of planting seeds for the 2016 crop for other grains and pulses were 0.12 TMT.

Fertilizer:

In March 2017, farmers continued to buy chemical fertilizer, and from March 1 through March 14 purchased 805.1 TMT of fertilizer (in active ingredient), which is 33.6 TMT more y-o-y. By March 14, 2017, the accumulated stocks of mineral fertilizer at farms, including carry-over stocks from last year, reached 1.08 MMT in active ingredient. These stocks are 8.7 percent more than last year, but still lower than the estimated fertilizer “need” for spring works. As of March 14, 2017, the average price for major fertilizer (including VAT, packaging and transportation, and distributors’ expenses) was the following (comparison with the same date last year in brackets):

- Ammonia nitrate - 13,887 Rubles/MT (minus 13 percent y-o-y);

- Carbamide - 18,285 Rubles/MT (minus 11 percent y-o-y);

- Potassium chloride - 15,269 Rubles/MT (minus 2 percent y-o-y);

- Azophoska (nitrogen, phosphorus, potassium compound fertilizer) - 20,336 Rubles/MT (minus 15 percent y-o-y); and

- Ammophos (compound fertilizer) - 28,079 Rubles/MT (minus 11 percent y-o-y).

The government influences the level of fertilizer prices for farmers through a mechanism of voluntary agreements with the major chemical fertilizer producers. In accordance with the order of the Government of the Russian Federation of January 1, 2013, the “market principle of pricing” for the supply of mineral fertilizers to domestic agricultural producers is applied. Producers set domestic prices (excluding VAT, packaging, logistics and distribution costs), taking into account the global market situation. However, in 2016, to ensure the availability of mineral fertilizers for agricultural producers in Russia and to increase the volume of fertilizer supply to the domestic market, the Ministry of Agriculture and the Ministry of Industry and Trade of the Russian Federation and the Russian Association of Fertilizer Producers (RAPU) developed and introduced a mechanisms to curb the growth of mineral fertilizer prices to domestic agricultural producers. The mechanism is fixed in the Agreement on Cooperation between the RAPU and Rosagropromsoyuz, which represents the interests of “large” Russian agricultural producers.

Agrochemicals

Most grain crops produced in Russia are based on low-cost agro-technologies with a minimum use of agrochemicals. This is reflected in the low average yields of most grain crops. The exception is corn production. In the last six years corn production in Russia more than doubled due to increased planted area, and the average corn yield increased nearly 30 percent. The corn yield increase was due to the use of better planting seeds and the use of modern agro-technologies, which envisage agrochemicals. There are no data on the use of agrochemicals by crop. Russia’s aggregate data on the use of agrochemicals applies primarily to production of such high yielding crops as sugar-beets, sunflowerseed, soybeans, and corn. The total use of agrochemicals in agriculture in 2016 was 121.6 TMT, including 73.4 TMT of imported chemicals and 48.2 domestic chemicals. The depreciation of the Ruble from fall 2014, hitting its lowest point in 2015 and remaining low until fall 2016, resulted in a rapid increase in prices of imported chemicals. Thus, with approximately the same level of chemicals application in 2015 and 2016, compared with 2014, resulted in an increase in the cost of chemicals from 28.8 billion Rubles in 2014 to 61.2 billion Rubles in 2015, and to 79.3 billion Rubles in 2016. In fall 2016 and spring 2017 the Ruble strengthened against the U.S. Dollar, but farmers’ general financial situation had weakened.

Therefore, industry analysts do not expect to see an increase in the use of agrochemicals in the 2017 grain production.

Fuel and Lubricants

The Ministry of Agriculture estimates the “need” of Russian farmers for fuel and lubricants for all 2017 field works at 4.68 MMT of diesel fuel (in 2016 – 4.74 MMT), and 850 TMT of gasoline (874 TMT in 2016). From January 1, 2017, through March 13, 2017, farmers purchased 130 TMT of diesel fuel and almost 27 TMT of gasoline. This is 0.2 percent and 4.9 percent more, respectively, than in the same period last year. As of March 13, 2017, farmers had stocks of 368.6 TMT of diesel fuel and 54.3 TMT of gasoline (7.9 percent and 11.5 percent more, respectively, y-o-y). As of March 2, 2017, the average all-Russia price for diesel fuel was 40,694 Rubles per 1 MT, and the price for Ai-92 gasoline was 44,212 Rubles per 1 MT (plus 16.5 percent and plus 12.8 percent, respectively, y-o-y).

Financing

The federal support for agriculture will decrease from 237 billion Rubles in 2016 to 215.9 billion Rubles in 2017, and is planned to decrease further to 198 billion Rubles in 2018 and 194 billion Rubles in 2019. In 2017, the Government consolidated agricultural support programs, and there is no official budget data on the financing of decoupled support programs in 2017. This was the only program that provided support to crop producers based on productivity of agricultural land. Based on information from industry analysts and materials presented by officials from the Ministry of Agriculture at various conferences, federal support of crop production in 2017 will decrease. In the 2016 federal budget support of plant production was 45.15 billion Rubles (93.4 percent of planned allocations). The plan for 2017 allocates 36.67 billion Rubles in support of plant production. Of this 2017 allocation, producers of grain, oilseeds, sugar beets, other so-called technical crops, potatoes and open-air vegetables may receive 11.34 billion Rubles total in the form of decoupled support. In 2016, financing of decoupled support from the federal budget was 23.04 billion Rubles. The government also amended the requirements for those farms that may apply for decoupled support:

- Delisted from this support are such provinces as Belgorod, Voronezh, Kursk, Lipetsk, Tambov and Rostov Oblasts, and Krasnodar Kray and Stavropol Kray because these provinces have already achieved a high level of financial-economic performance in agriculture;

- Changed the scale-up factor from 1.4 in 2016 for provinces of Baykal region and the Far-East Federal District to 1.7 in 2017 for provinces of the non-Black Earth zone of the Russian Federation, which are subject to droughts and floods, for the North-West Federal District and the Far East Federal District;

- The Ministry of Agriculture also plans to change the basis for subsidies. If in 2016, 60 percent of a subsidy depended on sown area, and 40 percent of a subsidy depended on the intensiveness of the use of arable land and soil fertility, in 2017 the major portion of subsidy will depend on sown area and soil fertility, and the smaller portion on intensiveness of use of arable land;

- The GOR added the production of planting seeds of corn, sugar beets, and sunflowerseeds to special sub-directions of decoupled support, which included in 2016 production of seed potatoes and planting seeds of open-air vegetables and production of open-air vegetables. Thus, the actual decoupled support of producers of grains and pulses, except producers of planting seeds of corn, will be negligible.

The Ministry of Agriculture forecast that the rates of federal subsidies for production of planting seeds of corn will be 32,700 Rubles per hectare for parent forms of hybrids, and 10,100 Rubles per hectare for planting seeds of first generation of hybrids. For planting seeds of sunflowerseeds, the per hectare subsidy may be 33,000 Rubles for parent forms of hybrids, and 8,700 Rubles for the first generation of hybrids, and 32,600 Rubles for original seeds of sunflowerseed varieties, and 9,000 Rubles for elite seeds of sunflowerseed varieties. The support of development of planting seeds of corn will not come into effect in MY 2017/18, and corn producers will continue depending on imported planting seeds of corn.

Financing of the seasonal spring works of agricultural producers from the state-owned banks, primarily with subsidized interest rate terms, increased in 2017 compared with 2016. By March 30, 2017, the total volume of credit resources for the seasonal field works reached 81.17 billion Rubles, 19.9 percent more than on the same date last year. This includes 70.7 billion Rubles loaned by Rosselkhozbank (46.6 percent more than last year, y-o-y), and 10.41 billion Rubles loaned by Sberbank (46.3 percent less than last year, y-o-y). Crop production still remained profitable in MY 2016/17, but farmer returns were lower than in MY 2015/16. In MY 2017/18, analysts forecast a further decrease of profitability for grain production due to an increased cost for sowing and decreased prices of major grains. The cost of spring sowing was 301 billion Rubles in 2015, 328.3 billion Rubles in 2016, and will increase to 334.7 billion Rubles in 2017.

Production Forecast by Major Crops

Wheat

Post forecasts wheat production in 2017 at 66 MMT, nine percent less than in 2016. Area sown to winter wheat, the highest yielding wheat, is 14.6 million hectares, 0.85 million hectares more than in 2016. So far industry analysts estimate the condition of winter grain as good, but slightly worse than in 2016. Post forecasts spring wheat area at 13.5 million hectares, slightly less than the Ministry of Agriculture, and 0.18 million hectares less than in 2016. Post’s forecast is based on the assumption that falling wheat prices and large carry-over stocks will force farmers to decrease spring wheat area. Based on ten year averages of the share of harvested area in planted area (96.8 percent for winter wheat and 90.8 percent for spring wheat), and on trend lines for winter and spring wheat yields for 2017, Post forecast that Russian farmers may produce 66 MMT of wheat, including 48 MMT of winter wheat and 18 MMT of spring wheat.

Barley

Post forecast 2017 barley production in at approximately 16 MMT, nine percent less than in 2016. Area sown to winter barley, the highest yielding barley, is 0.44 million hectares, 27,400 hectares more than in 2016. So far industry analysts estimate the condition of winter barley as good. However, winter barley comprises only 11 percent of the total barley crop (average for ten years), while 89 percent of the barley crop is spring barley. Post forecasts that Russian farmers will plant 7.7 million hectares to spring barley, slightly more than the Russian Ministry of Agriculture forecasts. Based on the ten year average share of harvested area to planted area (approximately 98 percent for winter barley and 93 percent for spring barley), and on trend lines for winter and spring barley yields for 2017, Post forecasts that Russian farmer may produce slightly more than 2 MMT of winter barley, and 14 MMT of spring barley, for a total of 16 MMT.

Corn

FAS/Moscow forecast for 2017 corn production is 15.3 MMT, the same as in 2016. The forecast is based on the assumption that area sown to corn for grain will be 3.06 million hectares, as forecast by the Ministry of Agriculture. Given that the average ratio of harvested area to planted area for corn is 92.5 percent, Post assumes that corn harvested area in 2017 will be approximately 2.85 million hectares. The linear trend yield for 2017 is at 5.5 MT/HA, but this trend line is based on the very high yield in 2016. Post forecasts that the 2017 corn yields will be approximately 5.35 MT/HA, and the corn crop in 2017 will be the same as in 2016.

Grain Quality

Along with the historic record of 72.5 MMT for the wheat crop, the average milling characteristics of deteriorated. Russian classification of wheat is based primarily on the content and quality of gluten, which determine the milling and baking quality of wheat. Soft wheat comprises over 98 percent of Russia’s wheat crop, and this wheat is classified from Class 3 (the best milling characteristics) to Class 5 (feed quality). In the last five years, along with an increasing wheat crop size, the share of milling wheat Class 3 decreased while the share of wheat Class 4 grew. In 2016, the bumper crop also resulted in an increased share of feed quality wheat.

In February 2017, mass media and the Federation Council (the upper chamber of the Federal Assembly, the major legislative body of the Russian Federation), raised concerns that exports of food quality wheat may create a shortage of food quality wheat in the domestic market. However, sample surveys of the 2017 wheat crop showed that the quantity of milling quality wheat is enough to meet domestic demand despite exports. Moreover, exports of wheat in February 2017 decreased, and industry analysts decreased the wheat exports estimate for MY 2016/17. The farmers increased offers of wheat Class 3, which they held in the fall 2016 and in the beginning of winter 2017. The prices of wheat Class 3 in the domestic market have decreased in March 2017, and continue to decline in April 2017.

Consumption

FAS/Moscow forecasts Russia’s total MY 2017/18 grain consumption at 75 MMT. This forecast is 1.1 MMT lower than the estimated total grain consumption in MY 2016/17. The consumption forecast includes 38.7 MMT of Feed and Residual (0.9 MMT lower than the estimated consumption in MY 2016/17) and 36.2 MMT of Food, Seed and Industrial (FSI) Consumption (0.2 MMT lower than in MY 2016/17). The forecast decrease is based on several considerations:

- Post assumes that consumption in the category “Feed and Residual” in MY 2016/17 includes a higher than usual “residual” because larger than last year quantity of grain, especially wheat, is still stored on farms, and will deteriorate in quality and, possibly, will be lost. Assuming that the 2017/18 grain crop will decrease, grain losses, or “residual” will also decrease, while “Feed” consumption will remain at the MY 2016/17 level;

- The decrease in the FSI consumption forecast is based on the assumption that Russian production and food consumption of buckwheat that is reflected in the “Other” category will be lower than in MY 2016/17. In 2016/17, due to the bumper buckwheat crop and lower prices, consumption of this cereal increased. The FSI consumption forecast for wheat, barley, corn, oats, millet and rice is almost the same as the estimated consumption of these grains in MY 2016/17.

Feed and Residual

Crops (except rice) is forecast at 37.9 MMT, that is two percent less than in MY 2016/17. Lowering the forecast is based on the assumption that the “residual” portion of this consumption will decrease, while the use of grain as a component in compound feeds will remain the same as in MY 2016/17. There are no official data on the use of grain in feed, but according to industry analyst, in MY 2016/17 the use of a grain component in compound feeds increased, because protein/vitamin mixtures have become more expensive. By crops, feed and residual consumption of wheat is forecast to decrease by 0.5 MMT to 16.5 MMT in MY 2017/18. Barley consumption is forecast to decrease by 0.3 MMT to 8.9 MMT. Meanwhile, corn consumption is forecast to increase from an estimated 8.7 MMT to 9.0 MMT due to the enlarged use of a corn component in feeding poultry and livestock. Oats feed consumption is forecast at 2.9 MMT, 0.15 MMT less than the estimate for MY 2016/17. The decrease is due to a lower crop forecast. Rye and millet feed consumption is forecast at 0.6 MMT total, 75 TMT less than in MY 2016/17 due to a lower millet crop forecast.

Food

FAS/Moscow forecasts that total Food, Seed and Industrial Consumption of seven reported grains (wheat, barley, corn, rye, oats, millet and rice) will be 33.34 MMT, almost the same as the estimated FSI consumption in MY 2016/17 (33.30 MMT). The forecast FSI consumption includes 23 MMT of wheat (the same as in MY 2016/17), 4.7 MMT of barley (the same as last year), 0.9 MMT of corn (the same as in MY 2016/17), 2.15 MMT of rye (50 TMT more than last year), 1.6 MMT of oats (the same as last year), 0.25 MMT of millet (the same as last year), and 740 TMT of rice (five TMT less than last year).

Domestic food consumption of grain and pulse products in 2017 will continue to be influenced by the Russian general economic situation. The economic crisis 2014-2015 started with a sharp Ruble depreciation in November and December 2014, followed by high Ruble volatility, accelerated inflation, and increased interest rates. Total consumer expenditures fell by 9.9 percent in 2015 as GDP dropped 3.7 percent and real disposable income fell by four percent. In this situation the consumer demand for grain and pulses food products increased. The major part of the category “Food, Seed, Industrial (FSI) consumption” in the PSD consists of food consumption. Given the decreased income of the Russian population, Post assumed that many people switched to cheaper staple products, such as grain products and cereals, and increased FSI consumption of seven reported grains from approximately 32.0 MMT in MY 2013/14 to 33.5 MMT in MY 2014/2015, and this consumption remained at approximately 33.3 MMT through MY 2016/2017 (estimate). In 2016, general economy continued decreasing, although the GDP in 2016 was down only by 0.2 percent. In March 2017, the rate of food price inflation decreased to 3.5 percent from 4.6 percent in December 2016, driven primarily by stronger Ruble exchange rate. However, the retail turnover in 2016 fell by 5.2 percent, primarily at the expense of expensive products, and real disposable income fell by 5.9 percent. Post forecasts that the FSI consumption of seven reported grain crops will remain in MY 2017/18 at 33.3 MMT, the same level as in MY 2017/18.

Trade

Post forecasts Russia’s total grain exports in MY 2017/18 at 37.7 MMT, a 2.0 MMT increase from the estimated grain and pulses exports in MY 2016/17. The forecast and estimate includes exports of pulses. Without pulses, exports of the seven reported grains are forecast at 36.9 MMT, 2.1 MMT more than the estimated 34.8 MMT exports in MY 2016/17. FAS/Moscow forecasts an increase in exports despite the lower crop in 2017 compared with 2016. The forecast is based on the following assumptions: high beginning of MY 2017/18 stocks of grain will continue pushing domestic prices down, domestic grain prices in Rubles will be lower, y-o-y, than the MY 2016/17 average, traders and the Russian government will continue developing foreign markets for Russian grain, and the Ruble will be less volatile. The export forecast includes 28 MMT of wheat (1.5 MMT more than wheat exports estimate for 2016/17), 3.3 MMT of barley (0.3 MMT more than the estimated exports in 2016/17), 5.4 MMT of corn (0.3 MMT more than in MY 2016/17), 180 TMT of milled rice (the same as in MY 2016/17), and approximately 860 TMT of other grains and pulses (estimate for MY 2016/17 is 925 TMT). The category “Other Grain and Pulses” includes primarily exports of pulses. FAS/Moscow estimates Russia’s total grain exports in 2016/17 at 35.7 MMT. These estimates include 26.5 MMT of wheat (including wheat flower in grain equivalent), 3.0 MMT of barley, 5.1 MMT of corn, 0.18 MMT of milled rice, 35 TMT of rye and oats, and 0.9 MMT of pulses. Post lowered the wheat exports estimate, compared with the USDA official estimate, by 1.5 MMT based on the real exports from July 2016 through March 2017. These exports did not meet traders’ expectations or preliminary forecasts for MY 2016/17. Barley and corn exports estimates are 0.4 MMT and 0.2 MMT, respectively. Both are lower than the USDA estimate for the same reason. Post’s estimate for rice exports is the same as USDA official estimate for milled rice exports in MY 2016/17.

There are still no official Customs data for March 2017, and estimate for March 2017 exports are based on reports from a variety of experts and on export data reported by the Federal Center for Grain Quality and Safety Assessment (FCGQSA). FCGQSA’s data are based on phytosanitary certificates issued for different grains and grain products. Russia’s total grain exports, including pulses and flour in grain equivalent, for the period July 2016 through March, 2017, reached 29.9 MMT. These exports included 22.02 MMT of wheat, 3.97 MMT of corn, 2.26 MMT of barley, 0.19 MMT of wheat flour in grain equivalent, 0.15 MMT of other grains and bran, and 0.73 MMT of pulses. Usually the assessments of the FCGQSA are higher than the Customs data. Based on the estimates of industry analysts, in March 2017, Russia exported 3.5-4 MMT of grain, including 3.0-3.1 MMT of wheat, and the total grain exports from July 2016 through March 2017 reached 29 MMT, including 22 MMT of wheat. Thus, Russia’s total exports in July-March exceeded exports in the same period in MY 2016/17 by 0.2 MMT; including exports of wheat, exceeded the last year level by approximately 1.5 MMT. Barley exports in the same period were lower than last year by approximately 1.5 MMT, and corn exports were higher than last year by 0.6 MMT. The Ministry of Agriculture decreased the total grain exports estimate in MY 2016/17 from the previous 37 MMT to 33.9 MMT. However, grain analysts still estimate Russia’s grain exports in MY 2016/17 higher - from 35.5 to 36.5 MMT, including 27.0 to 28.0 MMT of wheat.

Wheat

Wheat exports from July 2016 through February 2017, reached 18.9 MMT, and exports of wheat flour, in wheat equivalent, were 0.15 MMT. These exports were one percent and 34 percent less than exports in the same period last year, respectively. In this period Russia exported 4.12 MMT of wheat to more than 75 countries. However, ten countries accounted for 67 percent of Russia’s wheat exports: Egypt - 1.95 MMT, Turkey – 1.95 MMT, Bangladesh - 1.64 MMT, Azerbaijan - 0.95 MMT, Nigeria - 0.94 MMT, Yemen - 0.78 MMT, Morocco – 0.67 MMT, Lebanon – 0.62 MMT, Sudan – almost 0.60 MMT, and Israel – 0.42 MMT. Industry analysts attribute the decrease in wheat exports in February to very unfavorable weather in the deep water ports and in the shallow ports of Azov-Don. In March, wheat exports skyrocketed due to improved conditions in the ports, reports of high March grain stocks at farms and processing enterprises, and the expectations of Turkish delisting of Russia as eligible for “duty free importer” status. Turkish importers of Russian wheat were allowed to import wheat on the previous terms (duty-free) on contracts signed before March 15, 2017. From July 1, 2016, through April 3, 2017, Russia exported to Turkey 2.3 MMT of wheat and, given that Customs data on exports to Turkey from July to February is 1.95 MMT, it is possible to assume that in March and the first three days of April, 2017, Russia exported to Turkey 0.3 MMT of wheat.

Barley

Barley exports from July 2016 through February 2017, was 2.09 MMT - the lowest barley exports in the last three years, y-o-y. Barley exports decreased due to lower than last year demand from Saudi Arabia, the main market for Russian barley. Never-the-less, Saudi Arabia has remained the primary market for Russian barley. From July 2016 through February 2017 Russia exported 926,700 MT of barley to Saudi Arabia. The other big markets for Russian barley were Iran – 305,700 MT, Libya – 149,100 MT, Lebanon – 127,700 MT, and Jordan – 106,100 MT. These five countries accounted for 77.4 percent of Russia’s barley exports during this period.

Corn

The corn marketing year begins in October, and from October 2016 through February 2017, Russia’s corn exports were 2.86 MMT, which is more than in any similar period in Russian history. Ten countries accounted for 88 percent of corn exports from Russia, including Iran (580,400 MT), Korea Republic (453,700 MT), Vietnam (355,200 MT), Turkey (343,300 MT), Japan (235,300 MT), Netherlands (228,900 MT), Lebanon (121,700 MT), Spain (71,200 MT), Greece (70,000 MT), and Bangladesh (52,700 MT).

Stocks

Assuming that grain crop in MY 2017/18 is forecast lower and exports is higher than in MY 2016/17, FAS/Moscow decreased the forecast carry-over grain stocks in the end of MY 2017/18 to 13.4 MMT from the estimated 15.1 MMT in the beginning of marketing year 2017/18. The forecast carry-over grain stocks include 11.13 MMT of wheat (estimated end of MY 2016/17 wheat stocks are 12.13 MMT), 0.68 MMT of barley (1.53 MMT by the end of MY 2016/17), 0.87 MMT of corn (0.82 MMT), and 0.72 MMT of other grains (0.63 MMT by the end of MY 2016/17).

As of April 1, 2017 are not available yet, and increased grain exports in March 2017 may decrease Russia’s April 1 grain stocks to the point where they are closer to “average April 1st stocks.” But as of March 1, 2017, the historic high grain crop, and slow exports, resulted in Russia’s highest grain stocks in the last seven years (the observed period). Stocks in southern European Russia, the major exporting region, were also the highest in the last seven years. Wheat stocks at assembling and processing enterprises were also the highest in the observed five year period. The 2016 bumper crop raised serious concerns about Russian grain storage.The aggregate capacity of grain storage in Russia is 115-119 MMT, including elevator capacity of 40 MMT; barn capacity of 64 MMT, with the so called on-the-floor storage; and capacity at grain processing enterprises of 15 MMT. Half of all storage capacity (all types of storage) is located at farms. The capacity of outdated elevators may exceed 20 MMT. These large, concrete elevators were built over 30 years ago and have capacity to store over 100 TMT. And, often the distribution of elevators by provinces, does not match the distribution of the grain crop from year to year. In some provinces elevators may be half empty, while others may be bursting with grain. Seventy percent of elevators do not meet the necessary storage requirements, and this may result in losses between 10 and 20 percent of the stored grain. An update on Russia’s grain storage capacity may be released with the completed 2016 Agricultural Census, expected in 2017-2018. Industry analysts also estimate the total grain storage capacity in Russia at 115-120 MMT, and this includes storage at farms, at assembling points (elevators of all levels), and at processing enterprises. The capacity of good elevators is approximately 38 MMT, or less than 35 percent of the total storage capacity. The remaining 77 MMT of storage are old barns and warehouses at farms, which cannot guarantee grain quality, or even quantity. Many elevators, yet alone barns, were built in Soviet times, and average grain losses at these facilities is three percent or more. Meanwhile, farmers keep these barns and use them for storing grain because storage at modern elevators is expensive. The fee for receiving grain at an elevator is approximately 150/200 Rubles per one MT. Storage of grain is 80 Rubles per month per one MT. Good quality grain must be stored at least six months and discharge after storage will cost the farmer another 300/400 Rubles per one MT. Thus, the total cost of storing grain at an elevator for six months is 930 to 1,080 Rubles per one MT, which is between 10 and 12 percent of the price of grain. On the other hand, farmers cannot afford to build their own elevator, because the pay-back period is 15-20 years.

These estimates, however, may not include storage at some poultry and livestock farms, and in agro-holding companies, which have their own feed mills, and keep their grain usually in good modern bins. According to industry analysts, the capacity of such storage increased in 2015 and 2016 in Kursk, Belgorod, Lipetsk, Orel, Pskov, and Amur Oblasts, although data are not available. In the last two to three years, Russian farmers also started using technologies of storing grain in plastic tubes, but there is no data on the extent to which these technologies are used.

Policy

In March 2017, Aleksander Tkachev, Minister of Agriculture, ordered the completion of grain procurement interventions for the 2016 grain crop by March 20, 2017. Grain interventions actually discontinued by mid-December 2016. During interventions (September to December 2016) the Government purchased (including Crimea) 954 TMT of grain from the 2016 crop, for over 9.1 billion rubles, including 143 TMT of wheat Class 3, 603 TMT of wheat Class 4, 155 TMT of wheat Class 5, and 53 TMT of barley (fodder). By January 1, 2017, the carry-over stocks of grain in the Intervention Fund (including grain from previous crop years) reached 4.04 MMT, which is 1.46 MMT more than on January 1, 2016. State Agent for conducting grain interventions, in January 2017, the State Intervention Fund had in its possession the following grain stocks: wheat Class 3 – 1,709.3 TMT, wheat Class 4 – 1,567.7 TMT, wheat Class 5 – 375.8 TMT, barley (feed quality) – 242.7 TMT, Rye (food Grade A) – 140.3 TMT.

On March 29, 2017, the Ministry of Agriculture posted information that the draft Order on the target level of prices for the possible grain procurement interventions for the 2017 grain crop is waiting approval of the Federal Antimonopoly Service. The Ministry underlines that the decision to initiate grain procurement interventions will be taken depending on the situation in the domestic market, and the proposed level of minimum prices will apply only if such a decision is taken. In previous years, the announcement of intervention prices at the end of March worked as the unofficial price target for the market. In order to avoid this, the Ministry emphasizes that it is not the price level itself, but the decision to begin interventions that is important. The interventions may not start in MY 2017/18. As of today there is no information on the approval of this Order.

For reference, the prices that are proposed by the Ministry of Agriculture for 2017 grain crop are the following:

- Soft food quality wheat Class 1 – 12,500 Rubles per 1 MT;

- Soft food quality wheat Class 2 – 11,500 Rubles per 1 MT;

- Soft food quality wheat Class 3 – 10,300 Rubles per 1 MT;

- Soft food quality wheat Class 4 – 9,000 Rubles per 1 MT;

- Wheat Class 5 – 7,600 Rubles per 1 MT;

- Rye, food quality, Class “A” – 7,400 Rubles per 1 MT;

- Barley, fodder – 7,600 Rubles per 1 MT;

- Corn, Class 3 – 7,900 Rubles per 1 MT. Prices are uniform for all Russian regions.

For the first time the Ministry announced prices for wheat Classes 1 and 2. In the last few years Russian farmers did not produce such wheat, and the reference price, according to the Ministry of Agriculture, may stimulate its production.

Marketing

During the last three years grain exports accounted for 25 to 30 percent of Russia’s grain crop, and exports significantly influenced domestic grain prices. Thus, the major driving factors of grain prices in MY 2016/17 were high domestic stocks of grain, the volatility of the Russian Ruble, the world grain market situation, and even political factors, such as exemption of Russia from the list of grain exporters to Turkey under the duty-free regime in March 2017, and temporary zero Ergot tolerance in grain exported to Egypt in August-September 2016.Grain prices reached the peak in the beginning of marketing year 2016/17, and then dropped in expectation of the bumper 2016 grain crop, then increased driven by the softening of the Ruble to the U.S. Dollar. However, since the beginning of CY 2017 prices have been declining due to the stronger Ruble, which impacted exports; the remaining large stocks of grain; the prospects of a good crop in 2017; and Turkish factor.

Changes in Ruble to U.S. Dollar exchange rate, grain prices changes in the European Russia, the main exporting region of the Russian Federation, since beginning of January 2016, in Rubles and in the U.S.

Wheat

Wheat

2015/2016

2016/2017

2017/2018

Market Begin Year



Russia

Jul 2015

Jul 2016

Jul 2017

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post


25577

25577

27004

27004

0

26500

Beginning Stocks

6285

6285

5601

5601

0

12130

Production

61044

61044

72529

72529

0

66000

MY Imports

815

815

500

500

0

500

TY Imports

815

815

500

500

0

500

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

68144

68144

78630

78630

0

78630

MY Exports

25543

25543

28000

26500

0

28000

TY Exports

25543

25543

28000

26500

0

28000

Feed and Residual

14000

14000

16000

17000

0

16500

FSI Consumption

23000

23000

23000

23000

0

23000

Total Consumption

37000

37000

39000

40000

0

39500

Ending Stocks

5601

5601

11630

12130

0

11130

Total Distribution

68144

68144

78630

78630

0

78630

Barley

Barley

Market Begin Year

Russia

2015/2016

2016/2017

2017/2018

Jul 2015

Jul 2016

Jul 2017

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

8042

8042

7955

7955

0

7600

Beginning Stocks

1533

1533

836

836

0

1533

Production

17083

17083

17547

17547

0

16000

MY Imports

61

61

50

50

0

50

TY Imports

99

99

50

50

0

50

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

18677

18677

18433

18433

0

17583

MY Exports

4241

4241

3400

3000

0

3300

TY Exports

3735

3735

3400

3000

0

3300

Feed and Residual

8900

8900

9000

9200

0

8900

FSI Consumption

4700

4700

4700

4700

0

4700

Total Consumption

13600

13600

13700

13900

0

13600

Ending Stocks

836

836

1333

1533

0

683

Total Distribution

18677

18677

18433

18433

0

17583


Corn


Corn

2015/2016

2016/2017

2017/2018

Market Begin Year


Russia

Oct 2015

Oct 2016

Oct 2017

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

2671

2671

2777

2777

0

2850

Beginning Stocks

348

348

169

169

0

824

Production

13168

13168

15305

15305

0

15300

MY Imports

44

44

50

50

0

50

TY Imports

44

44

50

50

0

50

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

13560

13560

15524

15524

0

16174

MY Exports

4691

4691

5300

5100

0

5400

TY Exports

4691

4691

5300

5100

0

5400

Feed and Residual

7800

7800

8700

8700

0

9000

FSI Consumption

900

900

900

900

0

900

Total Consumption

8700

8700

9600

9600

0

9900

Ending Stocks

169

169

624

824

0

874

Total Distribution

13560

13560

15524

15524

0

16174


Rye


Rye

2015/2016


2016/2017

2017/2018

Market Begin Year

Jul 2015

Jul 2016

Jul 2017

Russia

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1249

1249

1251

1251

0

1500

Beginning Stocks

264

264

130

130

0

263

Production

2084

2084

2538

2538

0

2600

MY Imports

5

5

5

5

0

5

TY Imports

5

5

5

5

0

5

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

2353

2353

2673

2673

0

2868

MY Exports

48

48

10

10

0

50

TY Exports

23

23

25

25

0

50

Feed and Residual

225

225

150

300

0

300

FSI Consumption

1950

1950

2100

2100

0

2150

Total Consumption

2175

2175

2250

2400

0

2450

Ending Stocks

130

130

413

263

0

368

Total Distribution

2353

2353

2673

2673

0

2868

Oats


Oats

2015/2016

2016/2017

2017/2018

Market Begin Year

Jul 2015

Jul 2016

Jul 2017

Russia

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

2829

2829

2746

2746

0

2750

Beginning Stocks

289

289

199

199

0

289

Production

4527

4527

4750

4750

0

4500

MY Imports

2

2

0

0

0

0

TY Imports

4

4

0

0

0

0

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

4818

4818

4949

4949

0

4789

MY Exports

19

19

10

10

0

10

TY Exports

16

16

10

10

0

10

Feed and Residual

3000

3000

3050

3050

0

2900

FSI Consumption

1600

1600

1600

1600

0

1600

Total Consumption

4600

4600

4650

4650

0

4500

Ending Stocks

199

199

289

289

0

279

Total Distribution

4818

4818

4949

4949

0

4789

Rice


Rice, Milled

2015/2016


2016/2017

2017/2018

Market Begin Year

Jan 2016

Jan 2017

Jan 2018


USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

199

199

204

204

0

205

Beginning Stocks

101

101

96

96

0

74

Milled Production

722

722

703

703

0

715

Rough Production

1111

1111

1082

1082

0

1100

Milling Rate (.9999)

6500

6500

6500

6500

0

6500

MY Imports

211

211

200

200

0

200

TY Imports

211

211

200

200

0

200

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

1034

1034

999

999

0

989

MY Exports

198

198

180

180

0

180

TY Exports

198

198

180

180

0

180

Consumption and Residual

740

740

745

745

0

740

Ending Stocks

96

96

74

74

0

69

Total Distribution

1034

1034

999

999

0

989

Millet

Millet

2015/2016

2016/2017

2017/2018

Market Begin Year

Jul 2015

Jul 2016

Jul 2017

Russia

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

440

440

406

406

0

400

Beginning Stocks

0

0

0

0

0

0

Production

565

565

625

625

0

550

MY Imports

0

0

0

0

0

0

TY Imports

0

0

0

0

0

0

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

565

565

625

625

0

550

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

320

320

375

375

0

300

FSI Consumption

245

245

250

250

0

250

Total Consumption

565

565

625

625

0

550

Ending Stocks

0

0

0

0

0

0

Total Distribution

565

565

625

625

0

550