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January 19 2013, 10:25 Source: APK-Inform Views: 1786

Results of the first half of the grain season-2012/13 in Russia

 

Every grain season in Russia has its unique features, and the current year did not become the exception. The first half of the season already passed, and we should highlight the key factors, which more or less will affect the further development of the grain market in the second half of MY.

Production

In the beginning of the new 2012/13 MY Russia faced the essential decrease of the grain general production that totaled 70.7 mln tonnes as opposed to 94.2 mln tonnes year before, as it was estimated by the Russian State Statistics Service. In particular in 2012 wheat crop totaled 37.7 mln tonnes – one of the lowest results in the recent 9 years. At the same times wheat quality is better than year before.

Barley harvest totaled 13.9 mln tonnes down 18% of 2011, but still up 67% of 2010 (one of the less yield years).

The major reasons of the grain general production essential decrease was the seedlings perish and the low yield due to the unfavorable weather conditions; drought that caught most of the regions of the country.

As for maize, despite the dry year according to the official data the country harvested almost 8 mln tonnes – the record rate – proceeded by the planted areas increase by 20% compared with 2011.

 

 

2010

2011

2012

planted areas, `000 ha

yield, c/ha

production, `000 tonnes

planted areas, `000 ha

yield, c/ha

production, `000 tonnes

planted areas, `000 ha

yield, c/ha

production, `000 tonnes

Wheat

26 613

19,1

41 508

25 552

22,6

56 240

24 682

17,7

37 717

Barley

7 214

16,8

8 350

7 881

22,0

16 938

8 816

18,2

13 939

Maize

1 416

30,0

3 084

1 716

43,4

6 962

2 055

42,2

7 994

Source: Federal State Statistics Service

Nontraditional beginning

After the beginning of the harvesting campaign it was clear that in 2012 the country will not reach the high rates of the yield and general production, so there will not be prices decrease in the beginning of the season when the market is being supplied with the new crop volumes. Harvest estimation weekly decrease “heated” the market owing high demand of the various buyers that caused prices further increase. So in the first month of the season 3-4 grade wheat average prices increased by 800-1400 RUR/t depending on the Federal District; feed wheat prices – by 850-1700 RUR/t; barley – by 1000-1800 RUR/t. During further few months there was positive price tendency. Large-scale volumes holders delayed sales waiting for prices increase. Due to the limited number of grain supplies the processing and export-oriented companies had to increase purchasing prices in order to attract the volumes. At the same time the agricultural producers selling the small parties of grain continued to increase sales prices.

The stated tendency was inherent for all the segments of food and feed grains.

Thus since the beginning of the season milling wheat average prices increased depending on the District by 3.7-4.1 thsd RUR/t (or by 48-57%); feed wheat – by 3.2-3.9 thsd RUR/t (or by 48-64%). The prices increase in the segment of feed barley in the period of July-December 2012/13 MY totaled to 2.9 thsd RUR/t (or by 55%).

Considering the current price tendency on the wheat market the Government accepted the decision on the providing of the trade interventions in the Districts faced the wheat and its byproducts prices essential increase. However there was no success of it because the grain price increased not only within the provided sales but also the grain offered by the agricultural producers. In total the Stated Intervention Fund of the Russian Federation realized nearly 1.2 mln tonnes within the trades.

 

 

As for maize despite the grain record harvest the prices rose in the beginning of the season are still high. Meanwhile in the regions there are differently directed tendencies. In the regions there is prices progressive decrease. And still the regions facing the active demand for grain with high qualitative parameters declare prices increase.

Domestic processing

Despite the grain supplies decrease on the market the harvested crop volume is sufficient for the domestic needs provision and also the export potential formation. Considering the fact of the major part of grain is for the domestic processing – production of milling, cereals and feed commodities let us analyze the dynamics of production of the commodities under the current conditions.

In the period of July-November 2012/13 MY flour production in Russia totaled 4.1 mln tonnes, down 2% of the same period of the previous season and down 1% of 2010/11 MY.

 

 

Since the beginning of the current MY fodder production in Russia faces the monthly increase in comparison with the same periods of the previous seasons. Thus in the period of July-November of 2012/13 MY mixed-feed enterprises produced nearly 8.5 mln tonnes as opposed to 7.5 mln tonnes in 2011/12 MY and 6.8 mln tonnes in 2010/11 MY. The stated commodities production increase is based on the positive dynamics of the poultry development.

 

Export sales

Considering the fact that wheat harvest has been rather low in this season the range of the operators were afraid of the repeat of 2010 when the government imposed exports ban. However the favorable world conjuncture and the statements of the government of the non-planning of any limiting measures caused the high grain exports in the first half of the season. Thus since the beginning of 2012/13 MY wheat exports form Russia totaled 9.1 mln tonnes as opposed to 12.9 mln tonnes exported in the same period of the previous MY and 3.4 mln tonnes in 2010/11 MY. The major buyers of wheat in the stated period the same as previously have traditionally been Egypt and Turkey which share totaled nearly 45% of the exported volumes.

The most active trade was in the segment of feed barley. Since the beginning of 2012/13 MY (July-November) barley exports totaled 1.8 mln tonnes up 7% compared with the previous season. The largest buyer of the Russian barley was Saudi Arabia with the share of 54% of the total exports.

 

 

 

 

 

 

 

In the period of October-November maize exports formed the record volume of 598.3 thsd tonnes for the reporting period. We should note that in the same period of 2011/12 MY the export volumes of the grain totaled 443.6 thsd tonnes, and in 2010/11 MY it was completely absent. In October Russia supplied the absolute export record - 340.4 thsd tonnes of maize. As for the geography of exports, by the end of October-November period Turkey became the leading buyer of maize from Russia (31% - share of the general export volume). It was followed by Germany and Italy, which purchased 8% each of the general exports, respectively.

 

 

 

 

 

 

Taking into account the prevailing situation on the world and Russian grain markets, in the second half of the season Russia will possibly face the following scenario of development.

The continuing increase of prices for wheat and barley, and reducing of the stocks of agricultural producers will assist to reduction of the export activity in the reporting segments. In the second half of the season wheat exports may reach nearly 1 mln tonnes, barley - 0.5 mln tonnes. At the same time, the record harvest of maize grain, as well as the need to increase funds for the spring field works will assist to activation of the grain supply on the market. The active trading rates in the market segment will allow keeping rather high rates of maize exports, which may become a new record for the grain. According to our estimations, the exports of maize in the season-2012/13 MY (October-September) may total nearly 2.5 mln tonnes.

How our hypothesis concerning the actual development of the market in the second half of the season to become real, time will tell only. But to date we can say that overwintering of winter crops and the first forecasts for the harvest-2013 will be one of the key factors in the second half of the season.

 

Anna Burka,

grain market analyst of АPК-Inform Agency

 

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