Voluntary Report - Public distribution

**Date:** 11/30/2007

**GAIN Report Number:** RS7086

RS7086

**Russian Federation**

**Grain and Feed**

**December Monthly Update**

**2007**

**Approved by:**

![](media/image1.wmf)Allan Mustard

U.S. Embassy

**Prepared by:**

Yelena Vassilieva, Kimberly Svec

**Report Highlights:**

December\'s grain production estimate for Russia is 80.4 million metric
tons (mmt). The wheat production estimate has been raised to 48.3 mmt (a
7.6-percent increase from the 2006 crop). The barley production estimate
has been raised to 16.5 mmt, but still remains 9 percent lower than the
2006 crop. Prohibitive export tariffs halted barley exports in November,
while wheat exports continued to grow in October and have remained
strong in November. Due to the increased crop estimate, the grain export
forecast has been raised to 12.7 mmt, including 11.5 mmt of wheat and
1.05 mmt of barley.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Trade Report

Moscow \[RS1\]

\[RS\]

Table of Contents

[Executive Summary 3](#executive-summary)

[The 2007 Crop 3](#the-2007-crop)

[Winter Sowing Progress 4](#winter-sowing-progress)

[Trade 4](#trade)

[Prices 4](#prices)

[Consumption 5](#consumption)

[Policy 5](#policy)

[PSD Tables 6](#psd-tables)

[Wheat 6](#wheat)

[Barley 7](#barley)

[Corn 8](#corn)

[Relevant Reports 8](#relevant-reports)

# Executive Summary

The December estimate of 2007 grain production for Russia is 80.4
million metric tons (mmt), up 2.3 percent from last year's crop. The
latest estimate has been raised from the November figures by 0.7 mmt,
including an increase in the wheat production estimate from 48.1 mmt to
48.3 mmt, and increases of 0.1 mmt for the barley and corn production
estimates to 16.5 mmt and 3.8 mmt, respectively. Estimates have been
raised due to bumper grain crops in the Siberian Federal district and
other oblasts.

Domestic wheat prices have stabilized at high levels, but wheat exports
have continued at a rapid pace and reached a monthly record of 2.8 mmt
in October 2007. Grain traders increased exports in October and
continued wheat exports in November in order to close their contracts
before a possible introduction of wheat export duties in January 2008.
Barley exports were relatively low in October due to a small crop, and
may cease in November after prohibitive export tariffs on barley came
into force on November 12, 2007. Given that in July -- November 2007,
Russia exported approximately 9.5 mmt of grain, and based on the
increased grain crop estimates, the total MY 2007 export estimate is
raised from 12.0 mmt to 12.7 mmt, including 11.5 mmt of wheat, 1.05 mmt
of barley, and nearly 150,000 metric tons of other grains, including
corn, rice, and rye.

Government interventions began on October 29, and by November 28 fewer
than 240,000 metric tons of wheat were sold from the 1.5 mmt grain
intervention fund. Grain was sold only to big flour mills connected with
provincial administrations at below market prices, and these
interventions have not influenced the grain market price. An increase in
wheat export tariffs up to 40 percent *ad valorum* is expected in
January 2008 if exports continue to grow and threaten domestic grain
consumption.

# The 2007 Crop

The Russian Ministry of Agriculture increased its grain crop estimate
from 80 mmt to 81 mmt due to the bumper grain crop in Siberian Federal
District, Orenburg oblast, and Kurgan oblast. Official data on grain
production by region and crop will not be available before the end of
January, but experts estimate the wheat crop at 47.9 -- 48.5 mmt (up 2.7
mmt from last year). According to sources, the grain crop in the
Siberian Federal District increased by almost 3.0 mmt from last year and
reached 15.0 -- 15.5 mmt. Reported data on grain crop production in
agricultural enterprises[^1] as of November 13 is minimally changed from
the October 30 report: total grain 65.74 mmt (up 0.3 mmt), including
wheat -- 40.55 mmt (up 0.15 mmt), barley 13.2 mmt (no increase), and
corn -- 2.82 mmt (up 0.22 mmt). On the assumption that the share of
agricultural enterprises in grain production remains unchanged in 2007,
the total bunker-weight grain crop as of November 13, 2007, may be
estimated at 83.9 mmt. Meanwhile, the media reports that by mid-November
Russia harvested 86.3 mmt of grain (bunker weight). The difference may
be attributed either to enterprises under-reporting or to the increased
private farmer share in grain production. Post raised the total grain
crop production estimate by 0.7 mmt to 80.4 mmt, including an increase
in the wheat production estimate from 48.1 mmt to 48.3 mmt, and a 0.1
mmt increase in the barley and corn production estimates to 16.5 mmt and
3.8 mmt, respectively. Another 0.3 mmt of the increase is attributed to
greater production of rye and other grains, such as buckwheat and rice.

# Winter Sowing Progress

Sources report that the total area sown to winter crops (both for grain
and green chop[^2] ) is 6-7 percent higher than in 2006. In agricultural
enterprises winter crops were sown on 12.83 million hectares by November
13[^3], compared with 11.71 million hectares on the same date a year
ago. Winter grain-for-grain area in agricultural enterprises increased
10 percent from 11.41 million hectares to 12.54 million hectares. Area
plowed for spring sowing also increased in agricultural enterprises by
12 percent from 23.79 million hectares on November 13, 2006 to 26.60
million hectares on the same data in 2007. The significant increase in
plowed-for-spring-sowing area demonstrates that many farmers still rely
on the traditional agro-technologies and crop rotation, rather than on
minimum- or no-till systems in crop production.

# Trade

According to SovEcon's preliminary data, Russia's grain exports in
October 2007 reached a monthly record of 3.0 mmt, including 2.8 mmt of
wheat and 200,000 metric tons of barley. Thus, the total grain exports
in July -- October, 2007 reached almost 7.8 mmt, including 7.1 mmt of
wheat (without wheat flour) and 650,000 metric tons of barley. Experts
estimate November's exports to decrease to 1.7mmt - 1.8 mmt due to
prohibitive export duties on barley, logistical problems (shortage of
railcars), and unfavorable weather in the sea ports. Grain exports in
June -- November 2007 are estimated at 9.5 mmt -- 9.6 mmt. Experts
expect that grain exports in December will not exceed 1.0 mmt due to
seasonal logistical constraints. Sources report that grain traders are
fulfilling their previous contracts, but are refraining from making new
contracts for January -- February, 2008, because further administrative
restrictions of grain exports are envisaged in the beginning of CY 2008.
However, given that the EU has lifted grain import quotas, Russia's
exporters may increase export plans. Due to actual exports in July -
November, 2007 and the increased crop estimate, Post raised the total
grain export estimate for MY 2007 to 12.7 mmt, including 11.5 mmt of
wheat, 1.05 mmt of barley, and up to 150,000 metric tons of other
grains. Given the good grain crop in Kazakhstan, Russia's wheat imports
are raised from 1.1 mmt to 1.4 mmt. Barley and corn imports estimates
are unchanged, while rice imports are estimated at 200,000 metric tons.
Russia's total grain imports are estimated at 2.0 mmt in MY 2007.

# Prices

Domestic prices have not changed since the end of October. In European
Russia, class 3 wheat prices remain at 6,000 rubles per metric ton[^4].
Despite price stabilization, domestic trade in grain is not active.
Present demand for food grain is partially filled with cheap wheat from
the intervention fund, and demand for grain for feeding is expected to
increase in January -- April 2008, when stocks of grain are exhausted at
feed mills and livestock and poultry farms.

# Consumption

Total MY 2007 domestic grain consumption is estimated at 70.4 mmt (up
approximately 2.0 mmt from MY 2006), including 34.25 mmt of feed grain
consumption (up 1.0 mmt from MY 2006), and 20.8 mmt of food grain
consumption (up 0.7 mmt from last year). Feed grain consumption is
increasing due to expansion of livestock feeding under the National
Priority Project[^5], while increased food grain consumption is
attributed primarily to consumer's reaction to growing retail food
prices.

# Policy

No changes have been made in grain export policy since the introduction
of export tariffs on wheat and barley[^6] on November 12, 2007. Experts
consider that the wheat export duty (10 percent *ad valorem*, but not
less than 22 Euro per metric ton) will not curb wheat exports, while
export duty on barley (30 percent *ad valorem*, but not less than 70
Euro per metric ton) will stop barley exports from Russia until this
duty is lifted. In November, the Russian Government discussed the
possibility of introducing prohibitive export duties (40 percent *ad
valorem*) on wheat as well or a ban on wheat exports. The export ban is
unlikely, as it requires some amendments to the federal legislature
framework which cannot be made before the new legislative authority is
elected and begins work. The prohibitive export duty, which may be
introduced by the Resolution of the Government, is more likely, though
Agricultural Minister Aleksey Gordeev said this week that import
restrictions may not be needed in the new year. The Russian Grain Union
is in the process of negotiations with the respective Government
agencies on the time of introduction of these duties. The government has
so far respected an unwritten agreement with Russian grain traders on
the postponement of measures to further curb wheat exports until January
2008. Given the favorable wheat crop, strong domestic demand and high
wheat prices, as well as some stabilization in the world wheat market,
Russian wheat exports may slow down without additional measures in
December 2007 -- February 2008.

Grain interventions continued in November 2007[^7]. By the end of
November, ten trading sessions were held at the authorized commodity
exchange, and 239,000 metric tons were sold, including 238,000 metric
tons of class 3 wheat and 1,000 metric ton of class 4 wheat. More than
1.2 mmt of wheat remain in the state intervention fund. All information
on the quantity of sales is on the website of the Commodity Exchange:
http://www.namex.org/UserFiles/SI281107.doc

Given that the buyers may only be big flour mills connected with
provincial administrations, the interventions function as a targeted
subsidy for local flour mills and will not influence grain market prices
due to the limited consumer effect. The average price of class 3 wheat
sold was low -- 5,082 rubles per metric ton and this price will not
encourage grain producers to start selling grain. For, example, Irkutsk
oblast's government tried to purchase food quality grain for the
regional fund and set the ceiling price at 5,500 rubles per metric ton.
Nobody volunteered to sell grain at this price.

# PSD Tables

## Wheat

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

  **Country**     **Russian                                                                                                   
                  Federation**                                                                                                

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

                  2005 Revised                          2006                              2007                                UOM
                                                        Estimate                          Forecast                            

                  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       24500        24500      24500       (1000 HA)

  Beginning       3891           3891       3891        3809       3809       3809        2380         2380       2380        (1000 MT)
  Stocks                                                                                                                      

  Production      47700          47700      47700       44900      44900      44900       48000        48100      48300       (1000 MT)

  MY Imports      1282           1282       1282        861        861        861         1000         1100       1400        (1000 MT)

  TY Imports      1282           1282       1282        861        861        861         1000         1100       1400        (1000 MT)

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

  Total Supply    52873          52873      52873       49570      49570      49570       51380        51580      52080       (1000 MT)

  MY Exports      10664          10664      10664       10790      10790      10790       12000        11000      11500       (1000 MT)

  TY Exports      10664          10664      10664       10790      10790      10790       12000        11000      11500       (1000 MT)

  Feed            14900          14900      14900       14100      14100      14100       14900        15000      15000       (1000 MT)
  Consumption                                                                                                                 

  FSI Consumption 23500          23500      23500       22300      22300      22300       22300        23400      23400       (1000 MT)

  Total           38400          38400      38400       36400      36400      36400       37200        38400      38400       (1000 MT)
  Consumption                                                                                                                 

  Ending Stocks   3809           3809       3809        2380       2380       2380        2180         2180       2180        (1000 MT)

  Total           52873          52873      52873       49570      49570      49570       51380        51580      52080       (1000 MT)
  Distribution                                                                                                                

  Yield           1.88           1.88       1.88        1.89       1.89       1.89        1.96         1.96       1.97        (MT/HA)
  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------

## Barley

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

  **Country**     **Russian                                                                                                   
                  Federation**                                                                                                

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

                  2005 Revised                          2006                              2007                                UOM
                                                        Estimate                          Forecast                            

                  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       9800         9800       9800        (1000 HA)

  Beginning       2110           2110       2110        873        873        873         1226         1173       1226        (1000 MT)
  Stocks                                                                                                                      

  Production      15800          15800      15800       18100      18100      18100       17000        16400      16500       (1000 MT)

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

  TY Imports      188            188        188         200        200        200         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      19173       18426        17773      17926       (1000 MT)

  MY Exports      1726           1726       1726        1547       1600       1547        1600         900        1050        (1000 MT)

  TY Exports      1397           1397       1397        2000       2000       2000        1600         900        1050        (1000 MT)

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

  FSI Consumption 4600           4600       4600        4600       4600       4600        4500         4500       4550        (1000 MT)

  Total           15500          15500      15500       16400      16400      16400       16100        16200      16150       (1000 MT)
  Consumption                                                                                                                 

  Ending Stocks   873            873        873         1226       1173       1226        726          673        726         (1000 MT)

  Total           18099          18099      18099       19173      19173      19173       18426        17773      17926       (1000 MT)
  Distribution                                                                                                                

  Yield           1.73           1.73       1.73        1.81       1.81       1.81        1.73         1.67       1.68        (MT/HA)
  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------

## Corn

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

  **Country**     **Russian                                                                                                   
                  Federation**                                                                                                

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

                  2005 Revised                          2006                              2007                                UOM
                                                        Estimate                          Forecast                            

                  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        1300         1400       1400        (1000 HA)

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

  Production      3200           3200       3200        3600       3600       3600        3500         3700       3800        (1000 MT)

  MY Imports      306            306        306         150        150        150         200          200        200         (1000 MT)

  TY Imports      306            306        306         150        150        150         200          0          200         (1000 MT)

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

  Total Supply    3747           3747       3747        3894       3894       3894        3894         4094       4194        (1000 MT)

  MY Exports      53             53         53          100        100        100         100          100        50          (1000 MT)

  TY Exports      53             53         53          100        100        100         100          100        50          (1000 MT)

  Feed            3000           3000       3000        3100       3100       3100        3100         3250       3350        (1000 MT)
  Consumption                                                                                                                 

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

  Total           3550           3550       3550        3600       3600       3600        3600         3850       3950        (1000 MT)
  Consumption                                                                                                                 

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

  Total           3747           3747       3747        3894       3894       3894        3894         4094       4194        (1000 MT)
  Distribution                                                                                                                

  Yield           3.76           3.76       3.76        3.6        3.6        3.6         2.69         2.64       2.71        (MT/HA)
  --------------- -------------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ----------- ---------

# Relevant Reports

RS7082 Grain and Feed / November Monthly Update

(

RS7075 Grain and Feed / Grain Interventions Announced

<http://www.fas.usda.gov/gainfiles/200710/146292770.doc>

RS7074 Grain and Feed / Court Upholds Anti-Trust Ruling Against VPSS

<http://www.fas.usda.gov/gainfiles/200710/146292764.doc>

RS7070 Grain and Feed / Russian Government Resolution on Temporary
Export Duties on Wheat and Barley

<http://www.fas.usda.gov/gainfiles/200710/146292739.doc>

RS7068 Grain and Feed / Grain Export Tariffs Coming in November

<http://www.fas.usda.gov/gainfiles/200710/146292716.doc>

RS7320 Grain and Feed / Grain Interventions and Export Tariffs Likely

<http://www.fas.usda.gov/gainfiles/200709/146292480.doc>

RS7059 Grain and Feed / Grain September Update

<http://www.fas.usda.gov/gainfiles/200708/146292218.doc>

RS7051 Agricultural Situation / Government Program for Agriculture and
for Market Regulation 2008-2012

<http://www.fas.usda.gov/gainfiles/200707/146291764.pdf>

RS7005 Agricultural Situation / Federal Law \"On Development of
Agriculture\"

<http://www.fas.usda.gov/gainfiles/200701/146279991.pdf>

RS7004 Agricultural Situation / Decrees on Agricultural Subsidization

<http://www.fas.usda.gov/gainfiles/200701/146279951.pdf>

[^1]: Agricultural enterprises, vs private households and private farms,
    include collective and state farms, joint stock companies and
    partnerships of all types, agricultural production cooperatives,
    subsidiary farming units affiliated with industrial, transportation
    and other enterprises, organizations and scientific research
    institutes.

[^2]: Some winter crops, including grains (i.e. rye) are sown for
    grain-or-green chop, depending on the winter survival of crop. Thus,
    winter rye may be harvested in spring for green chop, or, if the
    stand is good, may be left for grain.

[^3]: Source: WJ Interagro

[^4]: Due to falling \$US to Ruble exchange rate, Russia's domestic
    wheat price in \$US increased from \$240 per metric tons to \$250
    per metric ton. The decreasing \$/Ruble exchange rate does not
    stimulate Russia's grain exports.

[^5]: GAIN RS7005 *Federal Law "On Development of Agriculture"*, and
    RS7051 *Government Program for Agriculture and for Market Regulation
    2008-2012*

[^6]: GAIN RS7070 *Russian Government Resolution on Temporary Export
    Duties on Wheat and Barley*

[^7]: GAIN RS7075 *Grain Interventions Announced*, RS7082 *Grain and
    feed November Monthly Update*