With an all-time record wheat crop of 73mmt safely in the
bag it’s worth taking stock and looking at what the future might hold for Russian
grain exports.
Russian agricultural policy has been unambiguous
since they introduced a ban on food imports from the EU, United States,
Norway, Canada and Australia in August 2004.
Pretty much everything coming out of the Ministry of Agriculture
has been focused on import substitution, increasing productivity, pushing hard
on exports by upping subsidies for farmers, returning idle land back in
to production, building more green houses, using more intervention and price
support or increasing state support for machinery manufacturers.
And it seems to be working; pig production up 13%, greenhouse
vegetables up 33%, milk production up 1.9%, farmers bought 11% more fertiliser
and now this year’s record wheat crop which has encouraged the Minister of
Agriculture to target 50mmt exports by 2020.
So how does a government come up with a production target? It seems to involve an element of wishful
thinking, aspiration and plucking a number out of the air.
In this case I think we can clearly see that 50mmt was
reached by drawing a straight line from 2012 through 2016 to 2020.
The only issue with this is scenario is it requires perfect linear
growth over the next four years which is highly unlikely.
Russia reached a record crop in 2016 because it rained
at the right time and the country is now overdue a difficult season as in 2010 and 2012 when severe drought and extensive crop failure led to export
restrictions and the government calling force majeure on existing contracts.
I’m not predicting Russia will see catastrophic crop
failure next season, indeed the winter crop is in good condition as we saw on our November crop tour, but you don’t need yields to drop very much before that
50mmt target starts to look a long way up.
I know that past performance is no indication of future
trends but assuming the government policy remains bullish on exports then it’s likely
we will continue to see exports rise but 35mmt possibly 40mmt by 2020 is
probably a more realistic target.