.

Voluntary Report - Public distribution

**Date:** 8/28/2007

**GAIN Report Number:** RS7059

RS7059

**Russian Federation**

**Grain and Feed**

**September Monthly Update**

**2007**

**Approved by:**

![](media/image1.wmf)Kimberly Svec

U.S. Embassy

**Prepared by:**

Yelena Vassilieva, Kimberly Svec, Kristy Goodfellow

**Report Highlights:**

Russia's 2007 total grain production forecast has been reduced by
300,000 metric tons to 77.7 million metric tons (mmt), including 45.0
mmt of wheat, 17.3 mmt of barley, and 3.8 mmt of corn. The reduction is
due to a 1.1 mmt drop in the corn forecast. Although total area planted
with corn has increased, yield is forecast lower than last year due to a
July drought in southern Russia. Wheat and barley production forecasts
increased by 700,000 metric tons and 200,000 metric tons, respectively.
Because of growing domestic demand for grain, the grain export forecast
was lowered by 300,000 metric tons to 11.5 mmt, including 10.0 mmt of
wheat, 1.4 mmt of barley, and 100,000 metric tons of corn.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Trade Report

Moscow \[RS1\]

\[RS\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Harvest Progress 3](#harvest-progress)

[Prices 4](#prices)

[Chart 1. Grain Prices, European Russia, U.S. Dollars per Metric Ton,
EXW
4](#chart-1.-grain-prices-european-russia-u.s.-dollars-per-metric-ton-exw)

[Trade 4](#trade)

[Chart 2. Russia's Grain Exports, by Months and by Grains
5](#chart-2.-russias-grain-exports-by-months-and-by-grains)

[Marketing 5](#marketing)

[PSD Tables 6](#psd-tables)

[Wheat 6](#wheat)

[Barley 7](#barley)

[Corn 8](#corn)

# Executive Summary

Russia's 2007 total grain production forecast[^1] was lowered by 300,000
metric tons to 77.7 million metric tons (mmt), including 45.0 mmt of
wheat, 17.3 mmt of barley, and 3.8 mmt of corn. The decrease is due to a
1.1 mmt drop in the corn forecast. Although total corn area has
increased this year, the yield is forecast lower than last year because
of a drought during July in southern Russia. At the same time, wheat and
barley production forecasts increased by 700,000 metric tons and 200,000
metric tons, respectively. Because domestic demand for grain is growing,
the grain export forecast was lowered by 300,000 metric tons to 11.5
mmt, including 10.0 mmt of wheat, 1.4 mmt of barley, and 100,000 metric
tons of corn.

# Harvest Progress

Russia's grain crop forecast has fallen to 77.7 mmt due to a decrease in
the corn production forecast from 4.8 mmt to 3.8 mmt. Lower yields and
corn crop losses have been caused by a drought in southern European
Russia, the main corn producing area. The wheat production forecast
increased by 700,000 metric tons to 45.0 mmt, and barley production
forecast increased by 200,000 metric tons to 17.3 mmt.

Russian MinAg's grain crop forecast has not been updated since June,
remaining at 76.0 mmt. However, MinAg's current reports on grain harvest
progress have been optimistic despite excessive heat in southern
European Russia and the Volga Valley in July through the beginning of
August, and rainy cool weather in West Siberia in July. According to
MinAg's data, by August 27 Russia harvested 55.5 mmt[^2] from
approximately 23.7 million hectares (52.7 percent of the total expected
grain harvest area).

According to MinAg, the Southern and Central Federal Districts have
almost completed the grain harvest, excluding corn. The latest update on
grain crops in the Southern Federal District was made on August 13. By
that date, the Southern Federal District had harvested 21.9 mmt of
grain, including 6.9 mmt in Krasnodar (from 70 percent of the expected
harvested area), and 4.0 mmt in Rostov oblast (from 72 percent of the
total crop area). The most recent data from Stavropol (published on
August 23) reported grain crops in Stavropol have already reached 6.7
mmt (from 90 percent of the expected grain crop area), including 5.66
mmt wheat. Ninety percent of wheat in Stavropol kray is recorded as
milling quality wheat. Krasnodar harvested 5.16 mmt of wheat. In Rostov
oblast, 3.28 mmt of wheat was harvested. Harvest in the Central Federal
District is reported as finished, but recent data on the status of the
harvest in this district is not available. As of August 13, the Central
Federal District harvested 10.8 mmt from 4.3 million hectares (62.5
percent of the expected grain crop area).

Grain harvest is in progress in the Volga Valley Federal District. As of
August 27, Volga Valley Federal District harvested 16.3 mmt of grain
from 8.5 million hectares (62.6 percent of expected grain crop area).

Harvest has begun in Ural and Siberia Federal Districts. By August 27,
2007, Ural Federal District harvested 767,000 metric tons of grain from
434,100 hectares (12.3 percent of expected area).

Some grain-producing territories of Siberia Federal District started
harvesting later than last year due to cool rainy weather in July.
Weather improved by the end of August and the harvest has accelerated.
By August 27, 2.1 mmt of grain from 1.1 million hectares (11.6 percent
of the expected grain area) were harvested. Altay kray, the grain leader
in Siberia Federal District, forecasts grain crop at 4.5--5.0 mmt, one
of the best crops in the last 5 years. Sources report that farmers are
extremely interested in decreasing harvest loss because for the first
time in many years they benefit from both high yields and high prices.
The cost of production of 1 metric ton of grain is 3,000 rubles, while
the current price of grain is 4,500 rubles per metric ton (without VAT).
Krasnoyarsk kray (the fourth biggest grain-producing region of Siberia
Federal District) is also expected to harvest more than 1.9 mmt, 10
percent more than in 2006.

# Prices

Grain prices increased rapidly throughout Russia until mid July. After
harvest progress reports improved, prices stabilized at high level, but
have begun decreasing slowly. The chart below shows changes in grain
prices in European Russia. Prices remain very attractive for both
exports and domestic sales, suggesting grain producers will receive high
returns. This situation may stimulate investments in 2008 winter grain.

## Chart 1. Grain Prices, European Russia, U.S. Dollars per Metric Ton, EXW

![](media/image2.wmf){width="6.468055555555556in"
height="3.203472222222222in"}

Source: "WJ Interagro"

# Trade

In MY 2006, Russia's total grain exports reached 12.2 mmt, including
10.46 mmt of wheat, 231,900 metric tons of flour in grain equivalent,
1.49 mmt of barley, and 70,700 metric tons of corn. The main
destinations for wheat exports were Egypt (2.2 mmt), India (2.0 mmt),
Bangladesh (0.9 mmt), Turkey (605,000 metric tons), and Georgia (510,000
metric tons). Exports nearly halted in June (Chart 1) due to an
uncertain 2007 crop forecast and high domestic grain prices. Given the
strained world grain supply forecast for MY 2007 and high international
prices, Russia is forecasted to export up to 10.0 mmt tons of grain, but
competition from domestic consumption will increase.

Russia's exports of barley were 1.49 mmt, including over 710,000 metric
tons exports to Saudi Arabia. Exports in MY2007 are forecasted at 1.4
mmt.

## Chart 2. Russia's Grain Exports, by Months and by Grains

![](media/image3.wmf){width="6.469444444444444in" height="3.78125in"}

Source: "SovEcon"

# Marketing

Domestic flour and bread price growth in May--July 2007 combined with
early reports on drought--damaged grain crops in some southern regions
of European Russia caused discussions all the way to the federal
government level about the necessity to intervene in the grain market.
However, the Russian Ministry of Agriculture decided to wait until the
grain crop situation is more clear. The decision to intervene using the
1.5 mmt's grain reserve has been postponed until mid-September. Field
harvest reports have significantly improved since then.

# PSD Tables

## Wheat

In MY 2006/07 Russia imported 794,000 metric tons of wheat (including
752,000 metric tons from Kazakhstan), and 32,000 metric tons of wheat
flour in grain equivalent. Sources report that wheat imports from
Kazakhstan decreased because international wheat markets offer better
prices than Russian consumers. Smaller adjustments were made in domestic
consumption of wheat and stocks for MY 2006. Wheat production forecasts
for MY 2007 rose to 45.0 mmt due to reports of good wheat crop in
Krasnodar and Stavropol krays and good wheat crop forecasts in Ural and
West Siberia. The wheat import forecast is reduced to 900,000 metric
tons due to attractive international prices for Kazakh's wheat.

  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------
  **PSD Table**                                                                                                               

  **Country**     **Russian                                                                                                   
                  Federation**                                                                                                

  **Commodity**   **Wheat**                                                               (1000                               
                                                                                          HA)(1000                            
                                                                                          MT)(MT/HA)                          

                  2005           Revised                2006       Estimate               2007         Forecast               UOM

                  USDA\          Post\      Post\       USDA\      Post\      Post\       USDA\        Post\      Post\       
                  Official       Estimate   Estimate\   Official   Estimate   Estimate\   Official     Estimate   Estimate\   
                                            New                               New                                 New         

  **Market Year                  07/2005    07/2005                07/2006    07/2006                  07/2007    07/2007     MM/YYYY
  Begin**                                                                                                                     

  Area Harvested  25400          25400      25400       23700      23700      23700       24000        24200      24200       (1000 HA)

  Beginning       3891           3891       3891        3809       3809       3809        2609         2609       2509        (1000 MT)
  Stocks                                                                                                                      

  Production      47700          47700      47700       44900      44900      44900       45500        44300      45000       (1000 MT)

  MY Imports      1282           1282       1282        1200       1000       850         1200         1200       900         (1000 MT)

  TY Imports      1282           1282       1282        1200       1000       850         1200         1200       900         (1000 MT)

  TY Imp. from    4              4          4           0          0          0           0            0          0           (1000 MT)
  U.S.                                                                                                                        

  Total Supply    52873          52873      52873       49909      49709      49559       49309        48109      48409       (1000 MT)

  MY Exports      10664          10664      10664       10700      10600      10700       11000        10100      10000       (1000 MT)

  TY Exports      10664          10664      10664       10700      10600      10700       11000        10100      10000       (1000 MT)

  Feed            14900          14900      14900       14100      14100      14000       14200        14100      14100       (1000 MT)
  Consumption                                                                                                                 

  FSI Consumption 23500          23500      23500       22500      22400      22350       22000        21900      22000       (1000 MT)

  Total           38400          38400      38400       36600      36500      36350       36200        36000      36100       (1000 MT)
  Consumption                                                                                                                 

  Ending Stocks   3809           3809       3809        2609       2609       2509        2109         2009       2309        (1000 MT)

  Total           52873          52873      52873       49909      49709      49559       49309        48109      48409       (1000 MT)
  Distribution                                                                                                                

  Yield           1.88           1.88       1.88        1.89       1.89       1.89        1.90         1.83       1.86        (MT/HA)
  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------

## Barley

In MY 2006, Russia imported almost 290,000 metric tons of barley,
including 76,000 metric tons from Finland, 51,000 metric tons from
Denmark, 44,000 metric tons from Kazakhstan, 37,000 metric tons from
France, and 23,000 metric tons from Uruguay. However, shortage in the
international supply of barley will not stimulate barley imports in MY
2007. Therefore, the forecast remains unchanged at 200,000 metric tons.
Barley exports in MY 2006 reached only 1.5 mmt. High domestic demand and
high barley prices are not enough to stimulate traders to export more
than 1.4 mmt in MY 2007.

  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------
  **Country**     **Russian                                                                                                   
                  Federation**                                                                                                

  **Commodity**   **Barley**                                                              (1000                               
                                                                                          HA)(1000                            
                                                                                          MT)(MT/HA)                          

                  2005           Revised                2006       Estimate               2007         Forecast               UOM

                  USDA\          Post\      Post\       USDA\      Post\      Post\       USDA\        Post\      Post\       
                  Official       Estimate   Estimate\   Official   Estimate   Estimate\   Official     Estimate   Estimate\   
                                            New                               New                                 New         

  **Market Year                  07/2005    07/2005                07/2006    07/2006                  07/2007    07/2007     MM/YYYY
  Begin**                                                                                                                     

  Area Harvested  9150           9150       9150        10000      10000      10000       10000        9900       9900        (1000 HA)

  Beginning       2110           2110       2110        873        873        873         1173         1073       1173        (1000 MT)
  Stocks                                                                                                                      

  Production      15800          15800      15800       18100      18100      18100       17500        17100      17300       (1000 MT)

  MY Imports      189            189        189         200        200        290         200          200        200         (1000 MT)

  TY Imports      188            188        188         200        200        290         200          200        200         (1000 MT)

  TY Imp. from    0              0          0           0          0          0           0            0          0           (1000 MT)
  U.S.                                                                                                                        

  Total Supply    18099          18099      18099       19173      19173      19263       18873        18373      18673       (1000 MT)

  MY Exports      1726           1726       1726        1600       1600       1500        1600         1500       1400        (1000 MT)

  TY Exports      1397           1397       1397        2000       2000       2000        1600         1500       1400        (1000 MT)

  Feed            10900          10900      10900       11800      11900      11990       11600        11600      11700       (1000 MT)
  Consumption                                                                                                                 

  FSI Consumption 4600           4600       4600        4600       4600       4600        4500         4400       4500        (1000 MT)

  Total           15500          15500      15500       16400      16500      16590       16100        16000      16200       (1000 MT)
  Consumption                                                                                                                 

  Ending Stocks   873            873        873         1173       1073       1173        1173         873        1073        (1000 MT)

  Total           18099          18099      18099       19173      19173      19263       18873        18373      18673       (1000 MT)
  Distribution                                                                                                                

  Yield           1.73           1.73       1.73        1.81       1.81       1.81        1.75         1.73       1.75        (MT/HA)
  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------

## Corn

  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------
  **PSD Table**                                                                                                               

  **Country**     **Russian                                                                                                   
                  Federation**                                                                                                

  **Commodity**   **Corn**                                                                (1000                               
                                                                                          HA)(1000                            
                                                                                          MT)(MT/HA)                          

                  2005           Revised                2006       Estimate               2007         Forecast               UOM

                  USDA\          Post\      Post\       USDA\      Post\      Post\       USDA\        Post\      Post\       
                  Official       Estimate   Estimate\   Official   Estimate   Estimate\   Official     Estimate   Estimate\   
                                            New                               New                                 New         

  **Market Year                  10/2005    10/2005                10/2006    10/2006                  10/2007    10/2007     MM/YYYY
  Begin**                                                                                                                     

  Area Harvested  850            850        850         1000       1000       1000        1250         1400       1300        (1000 HA)

  Beginning       241            241        241         144        144        144         194          194        144         (1000 MT)
  Stocks                                                                                                                      

  Production      3200           3200       3200        3600       3600       3600        3500         4800       3800        (1000 MT)

  MY Imports      306            306        306         250        250        200         200          50         200         (1000 MT)

  TY Imports      306            306        306         250        250        200         200          50         200         (1000 MT)

  TY Imp. from    15             15         15          0          0          0           0            0          0           (1000 MT)
  U.S.                                                                                                                        

  Total Supply    3747           3747       3747        3994       3994       3944        3894         5044       4144        (1000 MT)

  MY Exports      53             53         53          100        100        100         100          200        100         (1000 MT)

  TY Exports      53             53         53          100        100        100         100          200        100         (1000 MT)

  Feed            3000           3000       3000        3200       3200       3200        3100         3700       3250        (1000 MT)
  Consumption                                                                                                                 

  FSI Consumption 550            550        550         500        500        500         500          650        600         (1000 MT)

  Total           3550           3550       3550        3700       3700       3700        3600         4350       3850        (1000 MT)
  Consumption                                                                                                                 

  Ending Stocks   144            144        144         194        194        144         194          494        194         (1000 MT)

  Total           3747           3747       3747        3994       3994       3944        3894         5044       4144        (1000 MT)
  Distribution                                                                                                                

  Yield           3.76           3.76       3.76        3.6        3.6        3.6         2.8          3.43       2.92        (MT/HA)
  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------

[^1]: Post's report provides updates from the previous Post's monthly
    update -- see GAIN RS7047 July Monthly Update, 2007, sent July 9,
    2007

[^2]: Current grain harvest data are given in the "bunker weight", which
    is 5-7 percent more than the final "clean" weight.