Russian farmers expecting for the new season




The previous issue of Agrimarket Weekly Report included the material concerning the current mood of Ukrainian farmers before the beginning of the new season, based on data of the polling of agricultural producers, which was realized by specialists of APK-Inform Agency. The article described the level of access of Ukrainian farmers to credit resources, their relation to the present prices for agricultural products, the required levels of prices for agricultural crops, in order to increase the sowing areas of any certain crop in the general structure of sowing areas in the following year. Thus, the present article describes the expectations of Russian farmers on the threshold of the new season. We asked agricultural producers to estimate the present prices for agricultural products, availability of credit resources in the agricultural industry of the Russian Federation. We will try to answer the reporting issues in the article. The polling of agricultural producers of Russia, realized by APK-Inform in May-June of 2010, became the basis of the article.

To date, many segments of industry of both Russia and Ukraine still continue working due to crediting resources, first of all. And the agricultural industry of these countries also continue the trend. Many agricultural producers of Russia provide own business activity at the expense of bank lending. At the same time, according to the majority of Russian agricultural producers, long-term credit resources have rather important role in the industry.

Short-term borrowed resources are mainly used for purchasing of seeds, crop protecting agents, fertilizers and etc., at the same time, banks provide such credits with rather unacceptable conditions, according to agricultural producers. As a result, many Russian farmers prefer using own circulating assets for the operating expenditures in own enterprises. But long-term crediting resources are quite important for purchasing of agricultural machinery, at the same time, only some part of agrarians of the Russian Federation has the access to such credits, according to the polling data.

But Russian farmers have somewhat better situation with crediting conditions compared to Ukrainian colleagues. The major part of agricultural producers of Russia take borrowed resources in the state banks, especially in Russian Agricultural Bank (Rosselkhozbank), which lowered all own credit interest rates at the end of March of the current year. For example, the annual interest rates for realization of spring filed works and purchasing of forage was fixed and totaled 12%, which became the unique credit offer to the domestic agricultural producers. Agrarians reached such benefits, because the government owns 100% of the bank shares. At the same time, Ukrainian farmers often received credits from commercial banks with the annual interest rates of 25-30% in the current year.

If the terms of long-term crediting improve in the future, 64% of the questioned farmers of Russia plan to reduce the average age of own agricultural machinery, which they want to replace (especially, tractors and combines). According to the polling data, to date, the average age of combines and tractors of the majority of agricultural producers of the Russian Federation totals 10 years.

Average age of agricultural machinery in the interviewed farms
  0-5 years 6-10 years 11-15 years 16 years and over
Tractors 21% 44% 20% 15%
Combines 31% 39% 21% 9%

At the same time, to date, the average age of agricultural machinery, when agrarians usually replace own old machinery to new agricultural technical equipment, totals 12-13 years. Many respondents mentioned that in some cases, the real age of agricultural machinery does not always meet the technical condition. Many factors depend on the origin, trade mark, load intensity, qualification of workers and etc., which are badly forecasted in good time.

Average age of replaced agricultural machinery in the interviewed farms
  Tractors Combines
Russia 13,3 12,3

And the profitability of cultivated agricultural crops also becomes one of the most important factors, influencing paying capacity of agricultural producers, and the desire to make the reporting renewal of old agricultural machinery. Thus, we decided to find out if the current prices for agricultural products cover business expenses of agricultural producers.

According to the Diagram 3, the majority of respondents provided the negative answer to the question. Taking into account the fact, we decided to ask farmers what the price for agricultural products should be in order to cover the operating expenses in their agricultural enterprises, and become acceptable for the further increasing of sowing areas structure of of the required crops (taking into account crop rotation and etc.). We decided to examine two main agricultural crops in the article (wheat and maize) and compare the prices, required for agricultural producers, with the real market prices for the crops (in the current and previous seasons).

We would like to pay attention that the given below difference in prices for wheat is caused by the fact that several agrarians talked about prices for milling wheat only, other agrarians - feed wheat prices only.

What market bid price for wheat should be to make you to increase the sowing area under the crop?
  Russia, RUR/t
Min. 3500
Average 5000
Max. 7000

According to the Diagrams 4 and 5, during recent several years, the level of prices for milling wheat in Russia continues decreasing, at the same time, the expenditures for wheat production continues increasing. In March 2010, the difference in prices between milling and feed wheat was almost absent, and the price levels (3500 RUR/t and 3400 RUR/t respectively) corresponded to the minimum price level, fixed by agricultural producers. Nevertheless, the prices removed far from the maximum limit of the desired price range, declared by farmers, and from the average level of the price range. Despite such minimum prices for wheat, Russian agricultural producers do not plan to lower wheat sowing areas.

What market bid price for maize should be to make you to increase the sowing area under the crop?
  Russia, RUR/t
Min. 4000
Average 6000
Max. 8000

In the sphere of maize, the situation with prices is much better compared to wheat prices. During recent several years, prices for maize in Russia continue slow-scale confident growing. In April 2010, prices for the grain were declared at the level of 5500 RUR/t, and reached the average index of the desired price levels of agricultural producers. At the same time, the index still stays below the maximum level of the required prices.

In 2008, the Government of the Russian Federation and Russian Agricultural Bank (Rosselkhozbank) worked out the program of development of the agricultural industry for 2008-2012 period, including crediting of agrarians, and regulation of market prices for agricultural products. The program brought hope to Russian agricultural producers that in 2012, the level of profitability of their business would increase, and they would start using less money-losing technologies of production, and purchase high-quality agricultural machinery, which is more optimum for the further reduction of the prime cost of agricultural commodities production.