The Russian Rouble and the implications for farming

It’s all appears to be going very Pete Tong in Russia with the rouble losing 15% against the dollar between Friday and yesterday.

The farming community in Russia is saying it’s all going mental with fertiliser dealer’s reneging on previous agreements and seed and pesticide suppliers refusing to price product.

After previously lifting interest rates 1% and saying they didn't want to panic the market, Russia’s central bank panicked the market by lifting it a whopping 6.5% and making the announcement at 1am after what appeared to be a crisis meeting.

Russian inflation and crude oil prices continue to add to the pressure as oil and gas make up a sizeable portion Russian exports.

Russian Agriculture Minister Nikolai Fyodorov said that he was waiting government approval to raise the intervention price for grain to increase state stocks from 1.5mmt to 3.5mmt and presumably slow down exports at the same time.

They may well happen anyway as the slump against the dollar has created a big disincentive for Russian farmers to sell their grain but to hold onto crop in a wait and see because surely it can’t get any worse type scenario.

If suppliers are not agreeing prices then farmers with crop to sell will have no significant cash flow demands either so best to hold for now.  

Under these circumstances spring is a long, long way off.

Against this background western commentators with no understanding of how Russians tick and who are more used to politicians resigning after tweeting a picture of a white van are incredulous that President Putin's popularity continues to remain buoyant.

Putin is due to give his annual press conference tomorrow, my guess is he will down play Russia's role in the spluttering economy electing to blame western foreign policy and sanctions.

One of the few Russians prepared to go on record with the BBC summed it up when John Simpson asked for her if life was going to be more difficult in the future while standing in the freezing rain at tram stop number three said “yes but it’ll pass, we will survive”.

Latest USDA weather update for western FSU

During November, cold conditions further stressed poorly established winter grains in the north, while winter wheat in key southern growing areas entered dormancy under mostly favourable conditions.

Autumn drought continued from Belarus and northern Ukraine into central Russia, with November precipitation totalling less than 50 percent of normal (locally less than 10 percent).

The lack of moisture coupled with an early onset of bitter cold (-20°C or lower) resulted in poorly established winter grains in more northerly growing areas.

In addition, a lack of snow cover may have resulted in some burn-back or winterkill during the coldest weather.

In contrast, despite a dry November, winter crops in southern growing areas were properly established due to plentiful autumn rainfall.

Therefore, winter wheat from southern Ukraine into southern portions of Russia entered dormancy under mostly favourable conditions and was better able to withstand the late-month bitter cold, despite a relatively shallow snowpack.

...and the latest USDA weather update for eastern FSU

During November, bitterly cold, snowy weather halted late spring wheat harvesting.

In particular, un-harvested spring wheat in southern portions of Russia’s Siberia District remained covered in a moderate to deep snow-pack, with a persistent arctic air mass keeping much of the region encased in snow.

These areas do not typically grow much winter wheat due to the harsh winters.

Snow and cold also halted late autumn fieldwork in the south, though the cotton harvest was reportedly completed before the cold, snowy weather arrived.

Friday's Russian news roundup

Pakistan’s Finance Ministers has told officials from the Commerce and Trade Authority to come up with a plan to export agricultural products to Russia.

He told exporters to take advantage of the ban imposed by the Russian government and that it will enhance overall exports of the country and lessen the current deficit, which is an easier thing to say than do.

He also told Ministries to prepare for World Food Exhibition 2015 in Moscow, I didn't know there was a World Food Exhibition in Moscow next year, I wonder if EU and US food producers are invited.

Russia will ban imports of live poultry and hatching eggs from the Netherlands starting today due to the outbreak of H5N8 in the Dutch village Kamperveen.  As well as poultry the village is renowned for manufacturing mobile leisure vehicles.

The problem with all these tit-for-tat bans is it’s difficult to spot a genuine case when a country is justified in restricting imports, I suspect this is genuine although I thought poultry and hatching eggs would already have come under the general sanctions list.

The on-off Russian export is back on with rumours that Russia will go ahead and limit exports apparently based on a comment by a Russian agriculture minister that the country would attempt to slow exports by raising the intervention price.

All the indicators suggest there won’t be export restrictions which leads one to think that’s exactly what will happen.

Belarus are saying the current embargo by Russia on their exports are unjustified and are hurting several Belarussian companies.

Russia has now said they will let some Belarussian enterprises resume exports to which Belarus responded that it is important to reopen exports for all the enterprises at once instead of two or four.

Vladislav Tsydik, Deputy Chairman of the Agrarian Policy Commission of the House of Representatives of the National Assembly of Belarus (and breathe) said “I am convinced that our products are as good as foreign ones, Belarussian products are organic, environmentally pristine and safe”.  But possibly slightly radioactive.

You have to feel sorry for Belarus, April 1986 the wind was blowing in a northerly direction taking with it the radioactive cloud from Chornobyl before dumping it over large parts of Belarus, no nuclear power stations on its territory but extensive contamination.

I've been to the contaminated regions and abandoned villages in the south of the country, a truly heart-breaking experience.

Have a good weekend.

Definitely maybe no Russian grain export restrictions

SovEcon said Russia’s December grain exports will remain high fuelled by a weaker rouble, which I take to mean exporting grain is a way of generating foreign currency, something Ukraine did when short of cash during the Yanukovych years.

Bunge said they do not see any signs of a possible imposition of grain export limitations by the Russian government and to date the company does not observe any government regulation of the market, and there is no indication that something should happen.

Which all feels a bit like the vote of absolute confidence a football manager receives from the board right before he is given the boot.

French four point beef support programme

I might be a bit cynical here but is it possible that the EU and other countries are using Russian food sanctions as an excuse to push support proposals in through the back door?

I'm not saying that there isn't a genuine effect as a result of the Russian issue but since when did Russia become such a significant trading partner that when it closes its doors the whole of the EU ag sector catches a cold?

The latest country to peg a support programme to the Russian issue is France who have put forward a four point programme to tackle problems arising in the beef sector.

While the French government say the programme is as a result of the Russian embargo they freely admit it has been amplified because of the prospect of the end of milk quotas in March next year.

Surely they have that the wrong way around, the real reason for a support programme is because of the end of milk quotas, the Russian problem just makes for a more palatable narrative.

The four priorities as set out by the French ag minister are in reality only two and come as no great surprise.

Financial aid to farmers from the French government and the EU (will the French government aid programme be supported by EU funds?) and developing export and domestic markets (which presumably require EU funds to administer).

I'm not having a specific go at the French here (I'm overwintering in rural France at the moment so I don’t want to upset French farmers), every EU member state is banging the drum for support and I suppose it’s a case of he who shouts loudest gets heard but may be we should be a bit clearer on the rationale behind the situation.

SigmaBleyzer macroeconomic situation report on Ukraine

SigmaBleyzer have released their latest macroeconomic situation report on Ukraine, the full transcript can be found here but below are a few highlights.

The Ukrainian currency (Hryvnia) continued to depreciate, falling to an historic low of UAH 16.05 per USD.

At the beginning of November, the National Bank of Ukraine (NBU) abandoned an unofficial peg of UAH 12.95 per USD,

A brief period of stability during October was achieved by the NBU forking out $1.4 billion with international reserves now at a ten year low of $12.6 billion.

Anticipated provision of sizeable foreign financial aid should contain Hryvnia depreciation beyond UAH 17 per USD.

The decline of agri exports to Russia has been mitigated to some extent by the growing exports to the EU thanks to unilateral trade preferences for Ukraine, extended by the EU until the end of 2015.

However due to the asymmetry in the structure of agro and food exports of Ukraine to Russia and the EU, exports to the EU are dominated by grains and edible oil (and some meat and dairy products) with fresh produce not being able to find a suitable alternative.

The problem with fresh produce is that Ukraine cannot achieve the quality standards or at least the necessary compliance records required for EU export.

Agri-news from Belarus, Russia and Kazakhstan

Belarus customs officers have restarted inspections of trucks on the border with Russia presumably in retaliation to Russia imposing a ban on the transit of food through Belarus to third countries.

Control over the countries’ borders was previously suspended in 2011 after Belarus, Russia and Kazakhstan had established the Customs Union.

A Russian trade delegation has expressed interest in importing agricultural produce from Zimbabwe.

Head of the delegation said that EU and US trade sanctions had propelled Russia to turn to Latin America, Asia and Africa for agricultural produce, conveniently forgetting it was Russia that imposed food import sanctions.

The head of the delegation went on to say they were interested in citrus fruits and understanding the nature and structure of subsidies because they believed that is the crux of the matter in terms of sustaining farmers, conveniently forgetting Russia has no money to subsidies farmers or that subsidies are a blunt instrument in managing agricultural policy.

Russian President Vladimir Putin was in Turkey last week.

Turkey looks to capitalise on the EU US Russian food sanctions by seeking to increase agricultural exports to Russia.

Turkish Minister Taner Yildiz said “Turkey will not make a choice between the European Union and Russia.  We are developing projects based on our own and mutual interests”.

Absolutely Minister but that will require a level of commitment to a business plan that hinges on politically imposed sanctions which could just as easily be lifted.  Risky.

Iran jumped on the supply Russia with food bandwagon when Deputy Minister of Agriculture said Iran has considerable supplies of food to be exported to Russia including chicken, eggs and fish.

I only hope the fish are not from the festering oil slick that is the Caspian Sea which by all accounts smells like TCP.

Indian Buffalo meat is potentially on Russian and Kazakhstan tables this winter as the Russian veterinary regulator Rosselkhoznadzor and Kazakhstan’s ministry of agriculture report that imports have now been cleared and it is now up to local companies to coordinate deliveries from suppliers.

I assume this is to supplement generic meat demand rather than to supply a niche market in organic buffalo steaks.

Buckwheat

Buckwheat makes it on to the BBC news.

Botanists call Buckwheat a pseudo-cereal because it’s not actually wheat, Russians call it tasty and wholesome.

Rumours that snow has ruined the harvest in the Altai region have caused panic-buying and pushed up the price.

A few week’s back I was in Spain and passed a Russian product shop run by Russians for the extensive Russian ex-pat community hankering after pelmini and smetana, out of interest I popped in.

The lady running the shop said they hadn't had any buckwheat delivered for several weeks but were expecting some soon, possibly, but the price had gone up.

Back in Russia experts are saying stockpiles are plentiful, they see no reason for concern or shortages and rule out any link with the sanctions imposed over the Ukraine crisis.

They go on to say panic-buying is pure and simple hysterics, which kind of describes what panic buying is.

Latest USDA weather update for western FSU

Cold, snowy weather maintained favourable conditions for dormant winter grains and oilseeds.

Across primary southern winter wheat areas of Russia and Ukraine, temperatures averaged 5 to 9°C below normal, with night-time lows dropping below -20°C in the coldest locales.

However, a moderate snow pack (5-15 cm) insulated dormant winter wheat from freeze damage, and a fresh snowfall (2-20 mm liquid equivalent) boosted moisture reserves and insulation from eastern Ukraine into south-western Russia during the period.

Farther north, areas along the border between Russia’s Volga, Southern, and Central Districts may have experienced some burn back or freeze damage, as a shallow snow cover (2-5 cm) likely left some winter crops exposed to temperatures as low as -23°C.

Russia requires $10bn to replace food imports

Despite the patriotic dig for victory rhetoric from Russia, replacing food imports banned by the government in response to western sanctions takes time and money.

Some banned products have found replacements from countries not affected by the ban but presumably there is a limit to how much this will provide particularly for products that have a long production cycle like beef.

While most ministers are saying we have it all sorted, we now have a supply of pig meat and we can make our own mozzarella, the Director from the economy department in the Ministry of Agriculture, Anatoli Kutsenko injected a bit more realism.

On Tuesday he told a conference that to replace imported foods the agricultural sector needed a massive budget allocation and "we'll be unable to solve the task to substantially increase production”.

According to Anatoli, to fully replace banned imported foods by 2020, Russian farmers would need at least 568bn roubles ($10.6bn) of government financed support.

To put that in context federal support for agricultural this year was 95bn roubles ($1.7bn).

Following Putin’s annual state-of-the nation address to parliament earlier today when he warned Russians of hard times ahead and urged self-reliance, it doesn't sound like anything near that amount if at all will be available.

Significant levels of support are unlikely to appear in the near future but I can see a situation when sanctions and import bans are lifted as the political landscape changes.

Which makes for a risky business plan if you hedging on supplying a market created by a political decision which could just as easily be reversed.

Latest USDA weather update for western FSU

Cold, snowy weather maintained favourable conditions for dormant winter grains and oilseeds.

Across key southern winter wheat areas of Russia and Ukraine, temperatures averaged 5°C or less, indicating crops were becoming or already dormant.

In addition, fresh snowfall (5-20 cm) by week’s end afforded winter wheat insulation against potential incursions of bitter cold.

Farther north, winter grains were also dormant from Belarus and northern Ukraine into central Russia, though crops in these areas were poorly established following an unfavourably dry autumn.

In addition, areas along the border between Russia’s Volga, Southern, and Central Districts remained devoid of snow cover, exposing winter crops to this past week’s bitter cold (-20 to -15°C).

Ukraine agricultural requires $5bn annual investment

Effective development of Ukraine agricultural will require an annual investment of $5bn for the next ten years said Oleg Ustenko, Executive Director of the Bleyzer Foundation.

I'm glad he said that because from my back of an envelope calculation I have always said Ukraine needs $50bn to make it a true farming powerhouse.

Mr Ustenko goes on to report that foreign investors are unwilling to invest in Ukraine because of the high level of corruption, administrative barriers and imperfections of the judicial system.

I agree that investors are unwilling invest but I would argue that the level of risk they associate with various issues is over-exaggerated and misplaced.

Investing in farming in Ukraine carries three basic areas of risks.

First there are agronomic problems associated with the weather, particularly cold and drought. What farmers do is mitigate the impact of weather by growing suitable crops, encouraging deep root growth and providing an ideal environment for plants to grow healthy and strong.

Farmers are well used to the idea that farming is a production process in a factory without a roof.

Then there is the perceived problem of theft and shrinkage.  No one who knows anything about doing business in Ukraine would deny that theft is widespread but it is not necessarily as big a problem as perceived.

The trick here is to put in technology, systems and procedures to make it difficult to steal; you won’t eliminate it but you can limit it.

Then there is the all-encompassing issue of corruption.  The subject of corruption requires a thesis of its own but for the sake of brevity I’ll keep to the idea that corruption is the local administration and government all over an investment trying to leverage brown envelopes.

Which is partly true in as much as they do hassle you and require a disproportionate amount of your time but the amount they ask for is a small part of an investment budget.  And to be fair they are usually only asking for support for their budgets which is insufficient to provide for the local community, easier to think of it as an additional local tax.

All these risks can relatively easily be managed and mitigated and are not as big or unique a problem as perceived.

In my experience the main reason investments tend to implode is because investors make the wrong investment, under invest in key areas, underestimate the real costs, over expect yields and prices (particularly in the early years), refuse to listen to and act upon clear information and recommendations and create more problems than is really necessary.

I continue to advise that Ukraine is a sound long term agricultural investment opportunity.

Harvest round-up from Ukraine, Russia and Kazakhstan

First snows starting to fall around the regions and harvesting is nearing completion.

Outstanding crops to be harvested will now be grabbed at in fits and starts with the usual small amount of maize and sunflower left out over winter although it will all be officially reported as being cut.

Ukraine has harvested 62.3mmt of grains and pulses from 14.4mha (97% of the planned area excluding Crimea) with an average yield of 4.32mt/ha.

This includes 25.8mmt of maize from 4.4mha (94%) with an average yield of 5.89mt/ha; 9.9mmt of sunflower from 5.1mha (97%) with an average yield of 1.96mt/ha and 3.8mmt of soybeans from 1.7mha (99%) with an average yield of 2.13mt/ha.

Russia has harvested 110.1mmt of grains from 43.8mha (97% of the planned areas) with an average yield of 2.51mt/ha.

This includes 62.2mmt of wheat from 23.9mha (97%); 21.2mmt of barley from 9.0mha (99%); 11.0mmt of maize from 2.4mha (92%); 8.6mmt of sunflower from 6.2mha (91%); 1.4mmt of oilseed rape from 6.2mha (88%) and 2.5mmt of soyabeans from 1.8mha (93%).

Kazakhstan harvest is slightly up on earlier predictions at 18.7mmt of grains but still down on the previous year’s 20.7mmt.

To date they have cut 14.7mha (98%) with an average yield of 1.27mt/ha.

Moscow's sushi should be safe

Russia has almost completed the rice harvest with 1.14mmt in bunker weight from 187,600 ha (95.7%) at an average yield of 6.1mt/ha.

To put rice in context Russia’s five year average annual production volumes are 1.0mmt or 0.14% of the world rice production and currently rank 36th position in the world.

Earlier this month the Governor of Primorye (about as far east in Russia you can get) met with Vladimir Putin in Vladivostok to discuss creating a programme to subsidise on-shore fish processing and creating a fishery cluster in Primorye.

Actually the decision to create a fishery cluster was made last year, the Governor is now just waiting for the Government to make a decision on financing.

So that's rice in the shed, if we can just get that fish on shore and transported from the far far east, Moscow should be good for sushi.

Latest USDA weather update for western FSU

Seasonably cold weather continued to ease winter crops into dormancy except in southern-most growing areas.

Temperatures averaged 1 to 2°C below normal over much of Ukraine and up to 5°C below normal in Russia; weekly average temperatures in Russia’s wheat belt remained below 5°C, indicating winter grains and oilseeds were now dormant.

However, southern-most wheat areas, in particular the North Caucasus and southern portions of the Southern District, continued to add vegetative growth as milder weather kept night-time readings above freezing.

In Ukraine, winter crops were approaching or easing into dormancy except along the Black Sea Coast, where milder conditions enabled additional wheat establishment.

Despite the seasonably chilly weather, the region was mostly devoid of snow cover, leaving winter wheat and barley exposed to potential incursions of bitter cold.

Russia to publish organic standards

Back at the turn of the last century I ran some training workshops on organic farming to academics, farmers and various industry bods in freezing classrooms across Russia, fortified with vodka and caviar sandwiches.

Good fun it was too but at the time I wasn't sure it was being taken all that seriously when what everyone really needed was access to affordable food which was organic anyway because no one had funds to buy chemicals or fertiliser.

So naturally I'm taking full credit for setting the seed fourteen years ago that resulted in the Russian State Duma Committee announcing the start of public comments and expert evaluations of a draft of National Standard (GOST/ГОСТ) “Regulations of Organic Production”.

That process is now complete and a new draft version of the standards is to be published later this month, with a helpful translation.

Which is timely as organics in Russia is hitting the headlines with stories that fledgling organic producers are seeing an opportunity to expand market share as sanctions restrict food imports and consumers are considering more deeply how and where food is produced.

Around the time I was talking organics with the Ruskie's I was also running a module on organics to British ag students who thought organic farming was the daftest thing they had ever heard and when was the bar open again?

Over time I think I managed to get the students to see that organics was basically a marketing opportunity, they shouldn't feel threatened by it and they could still home and spray the bejesus out of every living thing because that’s the way Dad did it but if someone else wanted to capitalise on a niche market that just left more room for conventional producers.

The organic market share in the Russian food sector is about 0.1% which seems optimistic to me as in all my years of travelling Russia I have never seen any, been offered any or to my knowledge eaten anything that was classed as organic.

I have eaten a lot of excellent, fresh, good quality, seasonal food that would have been organic in as much that it was grown without pesticides or bagged fertiliser but would not satisfy the comprehensive and ridiculously extensive list of accreditation requirements that make up most organic standards.

The Russian organic sector has failed to catch on for a number of reasons but a lack of clear organic legislation hasn't helped so this initiative to produce a set of national standards should be a step in the right direction.

I'm intrigued to see the standards and I'll update when they are released.

Latest agri-business news from Ukraine and Russia

New Holland are reporting 2014 Ukraine and Moldova sales will be down 40% on the previous year.

They say devaluation of the hryvnia and military action are the reason sales have dropped from 800 units to 500 units in 2014.

They can add to that a massive drop in commodity prices which meant many farmers have put off planned capital purchases for just one more season.

Broadly speaking a farming business should be looking to depreciate over four to six years depending on the machine; in Ukraine it’s often double that and with hard hours.

The Dutch are leading a project looking at improving the Ukrainian agricultural land market by assisting in the development of a legislative framework.

Most would agree reforms in the land sector would attract investors but it seems every government since Kuchma thought liberalisation of land ownership rights too hot to handle and kicked it into the long grass.

A moratorium on the sale of agricultural land has been in place since 2004 and was recently extended until 2016.

That may change under the latest administration who seem to want progress and it could be a way of raising revenue for a cash strapped country.

The main problem is summed up by Andriy Koshyl, president of the Land Union of Ukraine when he said “we have a problem here because we don't know today's price for our land”.

The US has published its latest update on Ukraine with all the usual gumph about capacity building and supporting democratic and constitutional reforms.

The bit that relates to agriculture is thin on detail but includes helping Ukrainian authorities to carry out reforms that will boost private sector investment in agriculture, improve access to credit and capital investment for farmers, and streamline agricultural sector regulation, all of which just sounds awesome.

The US has already committed $320 million in assistance this year in addition to $1 billion sovereign loan guarantee and last week in Kyiv Joe Biden announced they will commit a further $20 million, pending approval from Congress.

You could put another zero on the end of that and it still wouldn't be enough.

Meanwhile in Southern Russia Dmitry Medvedev is keeping himself busy today visiting a farm in Krasnodar where he will hold a meeting of the Council on Modernization of Russia’s Economy and Innovative Development.

Can’t wait to see the outcome from that talking shop.

Moving even further south and the Caucasus are being talked up as a major fruit and vegetable producer to supplying the rest of Russia in response to sanctions as it was in the good old days.

Problem is while everyone agrees it has the climate etc no one seems willing to stump up funds to rebuild glasshouses and replant the orchards that have long since fallen in to neglect.

Moscow will tighten restrictions on meat products travelling from Belarus to Kazakhstan following attempts to sell banned imports in Russia so say authorities.

Personally I think it might just be in response to comments from Alexander Lukashnko when in a strange attempt at marketing local produce said "Belarusian [food] is of substantially higher quality…there is no toilet paper in the salami and never was...such facts have been discovered at Russian enterprises - toilet paper, soy, all kinds of additives”.

He doesn't say if the toilet paper was used or not.

Uralkali accident likely to hit farmers

Uralkali is a Russian potash fertiliser producer listed on the London and Moscow Exchanges.

They export to over 60 countries including Brazil, India, China, Southeast Asia, Russia, USA, and Europe.

 

In 2013 Uralkali produced 10mmt of potash so it’s probably not overkill to say that a recent mine accident which has threatened some 2.5mmt of capacity will hit supply and lift global potash prices.

A 40m diameter sink-hole appeared at one of its mines suspending operations and further collapses and flooding have left a high degree of uncertainty over its future.

Uralkali intends to accelerating development at other mines to make up the shortfall but admit plans would take some time to realise and there would be no replacement capacity in the next three years.

Not good news for farmers already facing two seasons of low commodity prices coupled with increasing costs and restricted markets.

Uralkali shares fell 21% in Moscow on Wednesday.

Agri-news from Ukraine, Kazakhstan and Russia

Ukraine’s production and exports of cheese is expected to decrease due to Russia’s import ban

forcing processors to switch to butter and non-fat dried milk production and rely on export sales.

Imports of dairy products will also decrease due to currency devaluation although local whole dairy products production will likely remain stable supported by domestic consumption.

According to PM Yatsenyuk Ukraine is willing to expand business cooperation with Norway especially in agriculture and energy.  

He goes on to point out that Ukraine expects a 5% increase in the agriculture sector this year and this has created new opportunities for the two countries.  

Meanwhile in Kazakhstan a Chinese consortium is planning to construct a 100 million eggs poultry farm.  One of the main investors said the project is experimental and will lay the foundation for other large projects in Kazakhstan in the future.

As Kazakhstan is self-sufficient in eggs the project will presumably be targeting exports to places like China and Russia although Russia is no slouch when it comes to laying eggs holding the number one producer in Europe position.

Talking of trade the regional integration in the post-Soviet space is set to continue with the launch of the Eurasian Economic Union (EEU) on January 1, 2015.  The initial EEU members will be Belarus, Kazakhstan, and Russia, with Armenia and Kyrgyzstan planning to join later.

In other news from Russia, 660 German heifers are taking four Boeing 747 flights to the Far East to stock up a large cattle-breeding complex in Primorye.  Apparently each pedigree cow can produce up to 4,500kg of milk per year which is three times higher than the average cow; assuming you feed it with something it can actually digest.

(4,500kg, surely that’s a mistake, the average for Russia is somewhere near that.)

Make up your own joke about travelling cattle class and not wanting to be sitting next to one because they hog the arm rest.

Talking of hogs and animals on a gap year, a herd of 587 pigs has travelled from Kursk region to a modern pig-breeding complex just launched in Sakhalin.

It didn't say how they travelled but I hope they flew as its over 9,000km by road.

Dutch poultry EU paltry

In the Netherlands a 150,000 layer farm was found to be infected with the avian flu strain H5N8.

The Dutch cannot export poultry meat to markets beyond the EU for the next three months and industry leaders are saying losses could be as high as €100 million.

No problem, just tap in to the EU agricultural contingency fund, a situation I would have thought the fund was set up for.

Only problem with that is that of the €433m set aside for 2015 EU ministers have in their infinite wisdom already spent €344m bailing out farmers hit by the EU US sanctions and Russian food embargo.

A similar strain of avian flu has also been identified on farms in Germany and the UK so presumably the call on what’s left in the fund will only grow and it’s still 2014.

Sounds like this hasn't been completely thought through.

Latest USDA weather update for western FSU

Dry, warmer weather overspread the region, benefiting winter crops in areas with sufficient soil moisture.

In particular, sunny skies allowed temperatures to rebound from October’s unseasonable cold, with readings during the week averaging 3 to 6°C above normal.

The warmer weather eased stress caused by recent bitter cold and allowed wheat to add vegetative growth in southern portions of the region.

The primary winter wheat oblasts in far southern Russia have received favourable autumn rainfall for establishment, and the week’s warmth and dryness further improved crop prospects.

However, soil moisture remained in short supply for winter wheat establishment from the southern Central District eastward into the northern Southern District and southern Volga, with many crops in these dry areas close to or already dormant.

Latest USDA GAIN reports

Ukraine

Ukraine’s grain exports are growing at moderate pace.  In the new marketing year 2014/15, by mid-October, Ukraine has exported over 6 million metric tons of wheat and over one million tons of barley.  Concurrently, the 2013/14 corn marketing year is approaching completion with over 18 million tons already exported.  Grain stocks are high due to a large production, but will likely deplete as the trade rallies on the expectation of another large corn harvest in 2014/15. Domestic grain prices at the start of the new season were lower than in the previous year and are expected to maintain low throughout the season.  Winter crops have been planted in favourable fall weather conditions.

Russia

Based on the officially reported data on grain harvest progress, FAS/Moscow increased its forecast of Russia’s total grain crop in MY 2014/15 by 2mmt to 101mmt.  The forecasted crop includes 57.5mmt of wheat, 19mmt of barley, 11.5mmt of corn, and almost 13mmt of other grains and pulses.  Given these crop volumes and the volatility of rouble exchange rate Russia may export 28mmt of grain, including 21mmt of wheat, 4mmt of barley, 2.5mmt of corn, and from 0.5 to 0.8mmt of other grains and pulses.

Kazakhstan

Kazakhstan’s 2014 grain harvest is lower than last year, with the FAS/Astana estimate for wheat production at 13.0mmt, down from last year’s 13.9mmt.  FAS/Astana estimates wheat exports in the 2014/15 marketing year at 6.0mmt, down 1.5mmt from last year but still far below the levels of 2011/12 of nearly 12mmt.  Delays in harvesting, and onset of rain and snow during the harvest resulted in lower production figures and high moisture content.  These factors are also expected to negatively impact Kazakhstan's exports.

Peas, beans and eggs in the Ukraine basket

Ukraine used to grow an assortment of legumes for human and animal feed but over the last decade the production of peas decreased by 40%.

Having looked at the economics of pea production it is easy to understand why; they made little money, are shallow rooted and a riskier crop to grow but there is no reason why productivity couldn't be improved.

Soybeans have replaced peas as a feed ingredient in recent years and are now produced in sufficient quantities to supply the domestic and export markets (just don’t be surprised if they turn out to be GM despite the law against growing GM crops in Ukraine).

The big problem with the current cropping balance in Ukraine is it relies heavily on a limited number of commodity crops - cereals, corn, sunflower, soyabeans - and while it’s OK to keep all your eggs in one basket you need to make sure you keep tight hold of that basket.

Growing commodity crops means you are completely reliant on the world market and as we saw in H13 the price can drop across all crops to below the cost of production.

Therefore it would be a wise agricultural policy that encourages and supports more crops in the mix rather than less which in addition to the environmental, operational and social benefits provides some buffer to the volatility of world markets.

Where I have seen peas and beans succeed in Ukraine is when they are grown on contract for a local animal feed mill or they are grown at a high quality to be sold locally for human consumption.

With the inevitable expansion of livestock sector domestic legumes would provide a valuable and economically viable source of proteins for emerging feed producers.

Adding value should lift the domestic price making them a more viable option than they seem to be at the moment.

Government policy should continue to support this.

Ukraine harvest & planting update

Ukraine harvest stands at 61.7mmt of grains and pulses from 14.3mha (97% excluding Crimea) with an average yield of 4.30mt/ha.

The highest grain yields occurred in western oblasts and reached 6.34mt/ha which gives you some idea of the long term potential.

To date Ukraine has harvested 25.2mmt of maize; 9.8mmt of sunflowers from 5.0mha (97%) with an average yield of 1.9mt/ha and 3.8mmt of soyabeans from 1.8mha (98%) with an average yield of 2.15mt/ha.

This week the President of Ukrainian Grain Association said that Ukraine could produce as much as 120mmt if it increased crop yields in line with the US and France and that ten years ago Ukraine produced 30mmt, today it’s more 60mmt.

He goes on to say that the crop yield is the integral indicator of development both the government and the agricultural sector.

I’d have to agree with that.

Russian harvest & planting update

Russia harvest currently stands at 109.9mmt of grains and pulses from 43.8mha (97.2%) with an average yield 2.51mt/ha.

To date Russia has harvested 62.2mmt of wheat from 23.9mha (97%) with an average yield of 2.61mt/ha; 21.2mmt of barley from 9.0mha (99%) with an average yield of 2.35mt/ha; 10.9mmt of corn from 2.4mha (91%) with an average yield of 4.56mt/ha; 8.6mmt of sunflowers from 6.1mha (90%) with an average yield of 1.40mt/ha; 1.4mmt of oilseed rape from 1.0mha (87%) with average yield of 1.39mt/ha; 2.5mmt of soybeans from 1.8mha (93%) with an average yield of 1.36mt/ha.

Russia has planted 16.8mha of winter grains or 101.6% of the planned.

Russia and Ukraine inflation to reach 9% and 20% respectively

Russia’s Head of the Ministry of Economic Development and Trade has said that 2014 inflation could reach 9% largely due to the Rouble declining 35-40%.

He further estimates inflation will reach 10% by the first quarter of 2015.

Meanwhile in Ukraine Oleg Ustenko from the Bleyzer Foundation said inflation for 2014 will exceed 20%.

He cites an outflow of foreign direct investments, decreasing of imports and exports and decreasing industrial production as the root causes.

If you told me those rates the other way around I would have found it more believable.

Agri-business news from Ukraine and Russia

USAID has presented a new eight-year programme to support agricultural development in Lviv, Kherson and Kharkiv oblasts with a budget of up to $6 million.  

It would be interesting to find out the rationale behind the choice of those three oblasts because it certainly looks politically motivated rather than technical.

An article by GRAIN (a non-profit organisation that works to support small scale farmers) pointed out that in Ukraine, small farmers operate on 16% of agricultural land, but provide 55% of agricultural output, including: 97% of potatoes, 97% of honey, 88% of vegetables, 83% of fruits and berries and 80% of milk.  

The article goes on to highlight the predicament of small farmers faced with an increasing mobilization of funds to support large scale agri-business at the detriment of the local population.  

A valid point and not one I would necessarily argue against but the question I have is who will fund agricultural development and food production if investment doesn't come from private finance?

Russian wheat prices rose slightly supported by the falling rouble and limited crops sales by farmers as they hold onto grains and sell sunflower seeds.

Moscow Times report that a shortage of available finance for farmers may affect the state's plans to quickly replace food imports with domestic production.

Agriculture Minister Nikolay Fyodorov reports that Russia no longer experiences pork shortages that emerged after the country imposed an embargo on imports.  It was eliminated by opening new markets and new countries and giving them permissions to import to Russia.  Does that sound credible given the time scale?

North Korea wants to rent 10,000 hectares in Russia's far-eastern Khabarovsk region and will farm it using its own workers and machinery to produce grain and vegetables.  Khabarovsk Agriculture Ministry has been quoted as saying the region is receptive to collaboration particularly in the construction of greenhouses and livestock farms.  So not a done deal yet.

The dispute over the CAP budget continues to gather momentum as twenty farm minister voiced their objection to the previous commission’s decision to activate the agricultural crisis reserve for next year to finance measures in response to the Russian food import ban.  

It seems they have already spent €344m of €433m put aside for 2015 and want to hang on to what’s left for next year’s unforeseen problems.

Life expectancy in Russia and Ukraine

The Russian Agriculture Ministry said they may reduce salt supplies from Ukraine but foresees no shortages.

It wouldn't do Russia or Ukraine any harm to cut down on salt and while they are at it alcohol, tobacco and sugar.

In the nineties life expectancy in Russia and Ukraine was similar to other countries under the control of the Soviet Union.

Since then life expectancy in Czech Republic, Hungary, Poland, Slovenia and the rest of Europe has increased while Russia and Ukraine departed from the trend and decreased.

Today one third of Ukrainians die prematurely before the age of 65 years, a rate much higher than in European countries.

A 2009 World Bank report said that about half of deaths before the age of 75 in Ukraine could be avoided through adequate prevention and treatment.

The biggest causes of premature mortality are linked to tobacco, alcohol and factors related to road safety and are largely modifiable and preventable.

The problem is further compounded by the lack of medical facilities which I can confirm first hand after having an emergency appendectomy several years back. 

I’ll spare you the detail but what is generally a routine procedure resulted in a near death experience, three separate operation’s, seven major incisions all taking place in a poorly equipped hospital in the middle of winter with intermittent heating and hot water. 

The highlight was my surgeon digging around in my wound without any anaesthetic looking to see if he had left anything behind that might have caused the complications.

He did refund my $600 though so it wasn't all bad.

The problem with consuming tobacco, alcohol and speeding and sometimes all three at the same time is we never believe it will happen to us.

It often requires government policy and action to bring in change to public attitudes and behaviour.

There have been some initiatives such as banning smoking in public places and the removal of alcohol sales from petrol stations, but as alcohol and tobacco consumption are amongst the highest in Europe and climbing it looks like much more needs to be done.

Ukraine harvest & planting update

Ukraine harvest stands at 60.7mmt of grains and pulses from 14.2mha (96% excluding Crimea) with an average yield of 4.28mt/ha (57mmt in 2013).

To date Ukraine has harvested 24.2mmt of maize from 4.1mha (89%) with an increasingly impressive average yield of 5.84mt/ha; 9.8mmt of sunflowers from 5.0mha (97%) with an average yield of 1.9mt/ha and 3.7mmt of soyabeans from 1.8mha (97%) with an average yield of 2.13mt/ha.

Ukraine has planted 7.5mha of winter grains (100% excluding Crimea) including 6.4mha wheat & triticale, 985kha barley and 149kha rye.

So far 6.3mha of winter grains have emerged with 83% in good to satisfactory condition, 17% poor, a further 1.0mha failed to emerge – that’s a poor emergence rate and slightly suspicious, I suspect more of that will be reported as emerged in the coming weeks.

Russian harvest & planting update

Russia harvest slowing down with 109mmt of grains and pulses from 43.6mha (96.9%) cut since the last report and an average yield of 2.50mt/ha.

This includes 61.7mmt of wheat from 23.8mha (97%) with an average yield of 2.59mt/ha; 21.1mmt of barley from 9.0mha (99%) with an average yield of 2.35mt/ha; 10.2mmt of corn from 2.2mha (85%) with an average yield of 4.53mt/ha; 8.4mmt of sunflowers from 5.9mha (88%) with an average yield of 1.41mt/ha; 1.4mmt of oilseed rape from 1.0mha (86%) with average yield of 1.42mt/ha. Anything not harvested will have shed seed and 2.4mmt of soybeans from 1.8mha (91%) with an average yield of 1.36mt/ha.

Russia has planted 16.6mha of winter grains or 100.4% of the planned, up 1.8mha on last year.

In view of the potential shortages in the larder the Deputy of the Agrarian Committee takes a relaxed view on GM saying a total ban is impossible.

To quote the other Marx “those are my principles and if you don’t like them, I have others”.

Belarus and Kazakhstan update

According to Belarus Deputy Minister of Ag, Russian rouble devaluation caused $160m loss in the agricultural industry of the country (8.6%) from August to October.

This won’t be helped by the Comrade next door banning meat imports but the Ministry of Agriculture and Food has a cunning plan to minimise losses by selling more cheese.

It is now the patriotic duty of every Belarussian citizen to eat more cheeses.

Not sure if the current policy not to export grains despite the large-scale harvest volumes is a good idea or not. 

Presumably the idea is based around adding value to grain and exporting milk and meat which is good if you can wait for the cash.

Kazakhstan harvest slightly upon forecasts at 18.0mmt of grains and pulses from 14.3mha (96%) with an average yield of 1.26mt/ha (20mmt in 2013).

I've just finished some research on Kazakhstan for a client, it's been a while since I was last there, call me masochistic but I kind of fancy going back.

Great place, great people but horse oesophagus does take some getting used to.

Latest USDA weather update for western FSU

Cold, mostly dry weather prevailed in major winter wheat areas, though somewhat milder conditions returned to northern - and western-most parts of the region.

A strong area of high pressure maintained sunny skies and below-normal temperatures (1-4°C below normal) in southern Russia.

Nighttime readings dropped below -5°C in key southern wheat oblasts, with weekly average temperatures less than 5°C indicating winter wheat was approaching or entering dormancy in the Southern and North Caucasus Districts in Russia.

Rain and snow (1-20 mm, liquid equivalent) were mostly confined to the North Caucasus District, though a secondary area of precipitation in northern portions of the Southern District provided some moisture for winter crops beset by an unfavourably dry autumn.

Meanwhile, near- to above-normal temperatures in Moldova, Ukraine, Belarus, and northern Russia eased crop stress brought on by the abrupt early-November cold.

Belarus and Kazakhstan update

Belarus maize harvest is almost finished with 105kha (98%) producing 789kmt giving an impressive (if not unbelievable) 7.51mt/ha.

If you want a flavour of how Belarus runs its agricultural policy then this article gives you an idea;

Belarus President lashes out at mismanagement in agricultural industry, demands 'iron discipline'

Kazakhstan harvest down this year with 17.5mmt from 14.0mha (93%) with anaverage yield of 1.25mt/ha (2013- 20.5mmt, 1.33mt/ha).

To put Kazakhstan in perspective, it is the sixth largest wheat producer in the world and in a good year can produce 27mmt of grain.

Ukraine harvest update

Ukraine harvested 58.9mmt of grains and pulses from 13.9mha (94% of the plan excluding Crimea) with an average yield of 4.22mt/ha (3.89mt/ha last year).

This includes 22.3mmt of maize from 3.9mha (83%) with an average yield of 5.73mt/ha;

9.6mmt of sunflower from 5.0mha (97%) with an average yield of 1.92mt/ha;

3.6mmt of soyabeans from 1.7mha (96%) with an average yield of 2.11mt/ha.

Ukraine has planted 7.4mha of winter grains (98%) including 6.3mha wheat & triticale, 941kha barley, 149kha rye.

Russian harvest update

Russia has harvested 108.3mmt of grains and pulses from 43.4mha (96.3%) with an average yield 2.50mt/ha.

This includes 61.6mmt of wheat from 23.6mha (97%) with an average yield of 2.60mt/ha;

barley - 21.0mmt from 8.9mha (99%) with an average yield of 2.35mt/ha;

corn - 10.0mmt from 2.2mha (84%) with an average yield of 4.53mt/ha;

sunflowers - 8.3mmt from 5.9mha (86%) with an average yield of 1.42mt/ha;

oilseed rape - 1.4mmt from 1.0mha (85%) with an average yield of 1.43mt/ha. I guess anything not harvested by now will have shed seed;

soyabeans - 2.3mmt from 1.7mha (87%) with an average yield of 1.36mt/ha.

Russian has all but finished planting with 16.4mha of winter grains (99.6% of planned area), up 1.89mha compared with the same date last year.

Why Ukraine crop condition might not be as bad as reported

The latest analysis on Ukraine crop condition is that devalued currency, lack of credit and economic uncertainty meant farmers have cut back on inputs leaving autumn cereals more susceptible to the forthcoming colder than average winter.

A pretty negative assessment perhaps but cutting back on inputs in the autumn might not necessarily be a bad thing.

Traditional (soviet) advice was to apply twenty odd kilograms of nitrogen to wheat in November to "give it a bit of a boost" ahead of the winter.

The effect was to make the crop greener and bigger but actually more susceptible to cold weather (something to do with plant cell size being larger and more likely to rupture on freezing). 

It’s now widely acknowledged that autumn applications of nitrogen fertiliser to all but the most backward of winter cereal crops has no impact on final yield so spending money in October is essentially a waste of time.

Cutting out autumn nitrogen not only saves money but it may actually improve winter survival rates.

As most Ukrainian farmers don’t apply residual herbicides because they believe it will damage the crop (it doesn't and they should) there are no chemicals to cut back on and no one applies autumn fungicides or insecticides.

You can’t really cut out seed otherwise you don’t have a crop and as pretty much all cereal seed is home saved most farmers would already have it in the shed ready to plant. 

Farmers might cut back on seed rate which as most crops are sown dense anyway might also be a good thing.

A lower seed rate saves costs (or creates some cash as you can sell off the surplus) and can increase yield if done right.

Diesel is the major autumn expense so cutting back on cultivations when cash is tight pretty much the only tangible cost saving to be made.

Many Ukrainian farmers cultivate the soil down to a fine, dry dust then wonder why the soil and seed get washed away in the first heavy rainfall or the seed germinates so slowly its super small going in to the winter.

Cutting back on cultivations will have conserved moisture, improved infiltration rates, reduced erosion and may have actually improved plant emergence and survival.

So it might not be as bad as analysts are reporting, sure the crops are small but any cutbacks to inputs might actually save money and improve the overall relative condition of the crop.

Latest USDA weather update for western FSU

Cold, mostly dry weather prevailed, with some rain and snow in the driest northern growing areas.

A strong area of high pressure brought sunny skies and below-normal temperatures (1-4°C below normal) to most winter crop areas of Ukraine and Russia.

Night time readings dropped below -10°C in central and northern Russia as well as the higher terrain of the North Caucasus District, accelerating winter crops into dormancy.

Somewhat milder conditions (night time lows of -5 to 0°C) in southern portions of Ukraine and Russia’s Southern District allowed winter wheat in these areas to remain vegetative.

Some light rain and wet snow (1-10 mm liquid equivalent) was reported in the driest winter wheat areas, including northern portions of the Southern District and southern-most portions of the Central District, though the past week’s cold likely minimized the moisture’s benefit since crops in these areas were approaching or entering dormancy.

Farther south, late-week rain and mountain snow (1-10 mm liquid equivalent) maintained favourable winter crop prospects in the North Caucasus and southern-most Southern District.

Across the remainder of Russia, lingering snow cover hindered or halted spring wheat harvesting in eastern portions of the country.

Russia harvest update

A cold front bringing wet weather and snow has slowed down harvest a little but then again it usually does this time of year so I wouldn't read too much into it.

Russia have currently harvested 107.3mmt of total grains and pulses in bunker weight from 42.9mha (95%) with an average yield of 2.50mt/ha.

Wheat 61.2mmt from 23.4mha (94%) with an average yield of 2.62mt/ha;

Barley 21.0mmt from 8.9mha (98%) with an average yield of 2.35mt/ha;

Corn 9.3mmt from 2.0mha (77%) with an average yield of 4.55mt/ha;

Sunflower 8.0mmt from 5.6mha (82%) with an average yield of 1.44mt/ha;

Oilseed rape 1.4mmt from 989kha (83%) with an average yield of 1.43mt/ha;

Soyabeans 2.2mmt from 1.6mha (83%) with an average yield of 1.36mt/ha.

Latest USDA weather update for western FSU

The coldest weather of the season settled over the region.

A strong cold front generated rain and wet snow over western and southern Russia as well as neighbouring portions of Ukraine and Belarus.

The moisture, which totalled more than 25 mm (liquid equivalent) in key winter wheat areas of southern Russia, was overall beneficial for vegetative winter grains and oilseeds.

However, temperatures behind the cold front averaged up to 5°C below normal, with the coldest conditions (night-time readings of -10°C or lower) in northern-most growing areas likely hastening winter crops into dormancy.

Even with some snow and cold, winter wheat in Russia’s Southern and North Caucasus Districts was not yet dormant.

In Ukraine, despite the changeable and unsettled weather, mostly dry conditions in north-central parts of the country facilitated corn and sunflower harvesting.

In contrast, winter wheat in southern Ukraine benefited from 10 to 25 mm (locally more) of rain.

Across the remainder of Russia, an early-season snowfall halted spring wheat harvesting in eastern portions of the country, while a sharp cold snap ended the growing season east of the Volga District.