“Over the two marketing years 2016/17 - 2017/18 Russia has fortified the first place in the world wheat trading and will consolidate its leader’s position this season as well. In the next ten years, Russia has many chances to remain at the top-3 largest exporters of wheat. And annual exports can range from 30 to 42 million tons per year, depending on the season. The main risks of achieving these rates are related to the nature of the grain markets in general and wheat in particular. A fundamental feature of the grain market is the variability of global gross fees and even greater production volatility for a single country.”
Director of the Department for
Information and Analytical Support
Russian Grain Union
In Russia, since the beginning of the 2000s, after the previous recession of agribusiness in the 90s, there has been a steady process of its recovery. Deep transformation processes in the agrarian sector, implementation of new, world-class production and management technologies in agriculture are being introduced, which makes it possible to reduce the dependence of agricultural production on natural and climatic conditions and increase its competitiveness in the domestic and global markets.
Over the past five years, from 2014 to 2018, the average annual growth rate of gross harvests was 4.1%, crop yields - 2.9%, and acreage - 0.2%. Winter wheat crops grew by 24%, the average annual growth rate of winter wheat yields is +3.3%. In 2017 we have obtained a record harvest of grain and wheat (135.5 million tons) and wheat (86 million tons). The reaction on the change of the demand was triggered by the change in the structure of crop areas. First of all, the export demand for Russian wheat and barley as well as for corn in recent years increased.
The growth of average crop yields has become a result of transmission to brand-new production technologies and management in agricultural sector. In particular, the level of application of mineral fertilizers per hectare of the crop area of cereals increased 2.9 times - from 20 kg in 2000 to 58 kg in 2017. At the same time, it remains noticeably lower than in 1990 (88 kg).
The volume growth of grain production in 2000s led to the grain excess that made the grain export boost. Export demand has become one of the main drivers of gross collection. Over the last five years the average annual growth rate of cereal exports was 27%, and the growth of domestic consumption was about 4.4%. Note that 40% of the grain is exported. The key export position is wheat (75% export of cereals for the last 5 years).
Over the two marketing years 2016/17 - 2017/18 Russia has fortified the first place in the world wheat trading and will consolidate its leader’s position this season as well. In the season 2017-2018 there has been reached the absolute record in wheat export –almost 41 million tons that forms 27% of global export.
The export growth greatly influenced the developments in infrastructure, firstly it affected seaports. The terminals’ export capacity of the Azov-Black Sea basin for the past ten years has increased from 30 to 55 million tons of grain per year. By 2023, the capacity of grain transshipment in ports may raise to 71 million tons per year. It will happen due to the development of Taman, the terminals in Novorossiysk and small ports on the Azov Sea.
The great part of wagon fleet is worn out and requires replacement, which is planning to happen in the coming years. During the high periods of grain shipments for export, there is an acute shortage of wagons. The consequence that indicates not only the lack of grain carriers but also it is associated with logistic problems in ports due to imbalances in the transmission capacity of railway access and grain storage and transshipment in ports.
Opportunities for the development of grain production in Russia are determined by Russia’s natural comparative advantages: the availability of the world’s largest arable land resources, water resources, mineral fertilizer industry and territorial proximity to the world regions with increasing demand for grain (Central and South-East Asia, Middle and the Middle East, Southern Europe, North Africa).
For the last years Russia greatly increased the scale of budget support in agricultural field. The issues of crop and grain production are limited by programs concerning access to mineral fertilizers and seed supply and through the possibility of access to state-subsidized credit resources for equipment purchasing, preferential equipment delivery by Rosagroleasing.
Export of grain and its products is one of the strategic directions for maintaining market liquidity and demands to forming clear export policy and creating necessary organizational mechanism in its implementation. The main idea of such a policy in grain export is a refusal to make any limitations and accomplishment of state support measures of export activity.
The Russian government has approved a priority project on the exports development of agricultural products. The budget of the project “Export of agricultural products” until 2024 will amount to 406.8 billion of roubles (approximately 6.2US $ billion). This project will strengthen Russia’s position on the world wheat market.
So in the next ten years, Russia has many chances to remain at the top-3 largest exporters of wheat. And annual exports can range from 30 to 42 million tons per year, depending on the season.The main risks of achieving these rates are related to the nature of the grain markets in general and wheat in particular. A fundamental feature of the grain market is the variability of global gross fees and even greater production volatility for a single country. First of all it’s supposed to be connected with fundamental unpredictability of weather conditions, which leads to fluctuations in yields. In addition, many other factors can affect the size of the gross harvest and can increase this variability, in particular: changes in the size of acreage, exchange rates, fuel prices and fertilizers. At the same time the demand for grain is relatively nonflexible.