This week's Black Sea agribusiness news in brief

Russia’s Minister of Agriculture, Alexander Tkachev, said earlier this week that grain exports will about 45-47MMT in this year.

 

The minister went on to say to say that Russia is developing a system to support the export of agricultural products and to make it competitive at the level of advanced foreign countries.

The production of Russian agricultural products for 2014-16 has grown by more than 11% and the export of agricultural products amounted to USD 20.1 billion.

I have since seen reports, yet unverified, that the ministry is now forecasting 50MMT of exports and I also read somewhere else that Russian agricultural exports now exceed arms in terms of value.

As of 24 January, Russian grain exports stood at 29.8 million tons, up 35% on the same period last season, (wheat 23.5MMT; barley 3.6MMT; corn 2.6MMT).

On the weather front, snow continued to fall across Russia and Ukraine last week offering further protection to winter crops, as confirmed by satellite data which showed both the geographical spread and depth of snow increased.

As soon as I tweeted this “fact” I received pictures of winter wheat and canola in southern Ukraine devoid of snow and not only that, looking ready for the first application of fertiliser, underlining the importance of first hand reporting.

Then as if to underline that underline, I noticed that since the beginning of December USDA have been reporting western FSU crops as dormant; the attached picture of a no-dormant central Russian wheat plant was taken at the beginning of January. 

Russia’s Ministry of Agriculture report this week that 95% of winter grain crops are in good and satisfactory condition and give an optimistic forecast for the harvest of winter crops from the European part of the country.

Clearly, they don’t know as these figures have remained unchanged since November, but I think its fair to say Russian crops are currently in an OK condition.

We will tour Russia in March to independently verify post-winter crop condition, subscription details to follow soon.

Russia preferential railway tariff, which is part of that developing system the minister referred to, has kicked in with 295,000MT of grain to be transported from Voronezh, Kurgan, Kursk, Lipetsk, Novosibirsk, Omsk, Orenburg, Oryol, Penza, Samara, Saratov, Tambov and Ulyanovsk.

Ukraine exported 157,800MT of organic grains between Jan-Nov 2017, up 11% on the same period the year before, including 59KMT of wheat, 83KMT of corn and 11KMT of barley, with 95% going to the EU.

Beijing-based China Harbor Engineering Company (CHEC) completed the first dredging project at Ukraine's Black Sea port of Yuzhny ahead of time when they deepened the an approach channel to 16m allowing the port to serve Panamax ships.

A second dredging project is on the cards at the Yuzhny, when CHEC will increase the depth of another approach channel to create a 16m deep operational area near three berths by the end of 2019.

And finally, Russian agronomists gathered today at the All-Russian Agronomical Meeting to discuss last year’s results, the tasks ahead for implementing measures envisaged by the State, and preparation for seasonal field agricultural work in 2018.

Only one day?

This week's Black Sea agribusiness news in brief

Snowfall across much of Russia and Ukraine’s crop growing region alleviated fears of damage to crops; there is still a chunk of winter to go but forecasts through next week show temperatures to be fine and as each week goes by the risk level diminishes.

The next thing to turn our attention to will be what might advanced crop development seen through the end of last year and early January mean to crop development come the spring? 

I now see the issue to be if Black Sea farmers will adjust agronomy programmes to take into account advanced crop (and weed) development?  Probably not.

Argentine's Minister of Agriculture met his Russian counterpart this week and reported the country has a sown 38 million hectares, of which only 65% ​​uses fertilisers and therefore he's interested in importing Russian fertiliser.

Russia's Minister of Agriculture responded by saying there is potential for increasing trade between the two countries and "We are ready to increase the export of Russian agricultural products to the Argentine market and meet other import requirements of Argentina".

Elsewhere and a new pork and poultry manufacturing hub, oriented towards exports to Asia, will soon be established in the Russian Far East according to Rusagro Group of Companies.

Russia’s 2017 milk production is up 3.5% on 2016 at 17.86 million tons, which supplies 82% of the total domestic demand, the balance coming from imports.

Russia’ Ministry of Agriculture reported that, as of January 17, exports of grain crops (excluding millet), amounted to about 28.9 million tons, 36% higher than the same date last year (21.2 million tons).  Wheat exports increased by a third, to 22.6 million tons (+ 35%) and barley exports to about 3.6 million tons, (+50%).

In Ukraine the European Bank for Reconstruction and Development (EBRD) agreed a $50 million loan to Ukraine grain business, Nibulon LLC for expansion and modernization of their grain logistics during 2018-19.

While in the same week, Delta Wilmar CIS reported they have pulled an investment plan for the construction of a $150 million plant in the port of Yuzhny, Ukraine, because of the actions of an organisation that extorted money from the company.

Over in France and the French wheat growers’ group AGPB said French farmers need to slash costs if they want to stop selling at a loss and regain market share lost to Black Sea.

"For 20 years, we have never seen such a worrying financial situation for French grain farms," explains Philippe Pinta, President of AGPB, "55% of grain farms are losing the money following a catastrophic national harvest in 2016".

Black Sea wheat now at low risk from cold weather

Snow has, and still is, falling over much of Russia and Ukraine and, to the excitement of many, it’s sticking!

By now, mid to late January, we’d expect to see 20-30cm of accumulated snow blanketing winter crops.

The latest satellite data shows it to be less than 5cm over large swathes of crop land, but that is still sufficient to offer protection if temperatures drop.

There is still a lot of winter to go but we are now passing the point when on average we see the lowest temperatures of the year.

That’s not to say we couldn’t still see some double-digit-minus-thermometer readings before winter is over, but as each day goes by that becomes less and less likely.

Given that winter crops went into the winter in good condition, most are now covered in snow and day length is on the increase, the risk of any winter related crop damage is low to very low.

Our next Black Sea Crop Tour is scheduled for March when we will properly assess post winter crop condition and get a first idea of yield potential, subscription details to follow shortly.

Russian government approves organic farming bill

This week Russia approved the draft federal law developed by the Ministry of Agriculture on the production of organic products.

During the approval process, Dmitry Medvedev, who chaired the process, noted the world market of organic products is experiencing rapid growth and Russia can take 10 to 25% of this market.

The bill introduces the basic concepts, determines which products have the right to be called organic, as well as the principles of production, and the powers of government bodies and local government.

The Minister of Agricultural, Alexander Tkachev, said "Over the past 15 years, the world organic food market has grown almost five times to $100 billion, and today it is 10% of the total world food market.  According to experts' forecasts, by 2022 the market of organic products will exceed $200 billion."

He also said "We have a sort of natural competitive advantage because in the 1990's, fertiliser applications significantly decreased, and part of the agricultural land has completely ceased to be processed.  A considerable amount of land has been formed, which meet the requirements of organic farming. In fact, Russia is a world bank for ecologically clean land."

Even so, presumably that land would still need to be determined to be eligible to produce products that have the right to be called organic by, for example, a two-year conversion period?

USDA FSU December weather summary

Western FSU

Unseasonably warm, wet December weather was mostly favourable for dormant winter wheat.  Temperatures during the month averaged 3 to 7°C above normal, causing much of the region’s moderate to heavy precipitation (more than 200 percent of normal over large tracts of farmland) to fall as rain.  As a result, primary growing areas remained uncharacteristically devoid of a protective snow cover and subsequently vulnerable to temperature extremes.  Nevertheless, winter wheat entered dormancy in satisfactory condition in Ukraine and Russia.

Eastern FSU

Seasonably colder weather prevailed across the region.  During December, temperatures averaged within 2°C of normal across central Russia and northern Kazakhstan.  The snowpack remained relatively shallow (less than 10 cm) over northwestern Kazakhstan and Russia’s Urals District, while snow coverage and depths increased elsewhere in northern Kazakhstan and central Russia.  Farther south, colder- and drier-than-normal weather prevailed over Uzbekistan, slowing winter wheat growth but maintaining higher-than-normal irrigation demands.

This week's Black Sea agribusiness news in brief

Snow spreading across parts of Russia, in particular southern central regions, reports of roads blocked due to heavy snow fall in Stavropol; the cold weather is unlikely to be an issue that far south, but snow will help replenish soil moisture reserves.

Ukraine saw a light dusting of snow this week, not enough to offer much protection if temperatures drop and unlikely to last long as temperatures are forecast to rise again by the weekend.

UkrAgroConsult forecast Ukraine’s wheat output will fall about 4% to a four-year low this year because winter sowings are vulnerable to winterkill.  The consultancy forecast a 2018 harvest of 25.1 million tons. 

I’ve had discussions with my farming contacts around Ukraine and we don’t agree with this; crop condition is good, in October we scored 97% of crops satisfactory or above and nothing has happened to reduce this.  Sure, crops are currently at elevated risk, but risk doesn’t necessarily mean it will happen, plus soil moisture is good, the hectares are there so why would yield drop? 

I will publish our initial forecast next week which we will update after the first crop tour scheduled for March when we will have a much better picture.

Grain Market Daily from AHDB report that following the release of multiple USDA reports last Friday global wheat markets have fallen and a larger US winter area than the market had expected and upward revisions to global 2017/18 production have pressured prices.

Bloomberg report soaring oil prices have caused the rouble to jump to a seven-month high, making Russian grain more expensive for overseas buyers.  To counter higher currency-related costs, exporters typically cut prices paid to farmers, the thinking then goes that rather than accept lower rates, growers will hold onto supplies in the hope that prices rise.

The counter to that was highlighted by Russia’s Minister of Agriculture who reported this week that the 2017 record grain harvest of 134 million tonnes will allow exports up to 45-47 million tonnes of grain.

Russia’s Ministry of Agriculture report 1.2 million hectares of sugar beet was harvested, 9% more than in 2016, producing at total of 48.2MMT, up 15% on the average yield for the period 2012-2016 although down on last year’s 51.3MMT crop.

Last Friday, the Wall Street Journal reported that, due to low prices and large stockpiles, American farmers are cutting wheat plantings. The current crop is expected to be the smallest since 1909.

And finally, Ukraine immigration officials now require a fingerprint scan as part of their biometric data collection at border crossings; I'm already looking forward to what will undoubtedly be a seamless and rapid process.

Russian winter crops; 95% in good condition

Earlier today, the Russian minister of agriculture, Alexander Tkachev, addressed the Federation Council on "Preparing for Spring Field Work in the Russian Federation".

The minister reported that 17.1 million hectares of winter crops have been planted (17.3 million hectares in 2016) and 95% of those crops are in good condition.  

Back in October 2017 we travelled across Russia to assess the condition of wheat and scored 98% of crops satisfactory or good* so it looks like we agree.

The minister went on to stress the importance of maintaining the growth rate of agroindustry, in line with government policy of greater agriculture output.

Tkachev mentioned bringing land that was in long term fallow or had been abandoned, back into production and said that in 2017 the sown area exceeded 80 million hectares, returning un-cropped agricultural land back into production was a priority and that in 2018, the sown area will increase by at least 200 thousand hectares.

The minister said that the 2017 record grain harvest of 134 million tonnes will allow exports up to 45-47 million tonnes of grain.

"Since the beginning of the agricultural season, 28 million tonnes of grain have already been exported, which is 35% more than last year. Export of wheat grew by one third to 22 million tonnes” noted the minister.

To support Russian farmers, the minister highlighted the recently launched grain transport subsidy so that not only the South of Russia, but also Siberia, Volga region, Urals, and Central Russia could supply grain to foreign markets.

The minister went on to say that he was confident that Russia will firmly consolidate the status of the world's largest wheat supplier.

(*Our November 2017 Russian and Ukraine crop tour report is still available, drop me a line if you would like to buy copies, priced £100).

This week's Black Sea agribusiness news in brief

Mild temperature continues to reduce snow cover across Russia and Ukraine.

Reuters report "Chicago wheat slid on Monday, on track for its biggest three-day fall since mid-December, although worry over lack of protective snow cover in the United States and Russia limited decline."

Russia’s Ministry of Agriculture report the first 100,000MT of grain has been transported at a reduced rate in accordance with the new policy on subsidising grain rail transport and included grain from Novosibirsk (52KMT), Omsk (35KMT), Orenburg (3 KMT) and Tambov (9KMT).

Russia’s Ministry of Agriculture report the sowing of winter crops for the harvest of 2018 is 17.4 million hectares, which corresponds to the same level as last year.

Russia’s Federal Service for Hydrometeorology and Environmental Monitoring report winter crops are in good and satisfactory condition on an area of 16.24 million hectares (95% of the total sown area).

The Deputy Minister of Agriculture gave insight into Russian agricultural policy yesterday when he said, "We face a serious challenge - not only to maintain the accelerated pace of development of the agrarian sector, but to provide conditions for its further growth.”

Eastern Europe’s largest biogas plant has opened in Western Ukraine, the Khmelnytskiy plant will convert manure, corn silage and sugar beet pulp into 15.6 mw of electricity, enough to power 16,000 households in the region.

Ukraine’s first solar plant located in the Chernobyl exclusion zone is to go on stream within weeks; the one-megawatt, 1.6ha site can cover the needs of a medium-sized village although plans are to eventually produce 100 times this.

The Times report Russian gas imported to Britain last year could be going to America as freezing weather in the US send prices soaring; a tanker carrying liquefied natural gas from storage facilities in Kent appeared to be heading to Boston, although its destination could yet change

The Ukrainian weather centre report that due to the influence of the Arctic air, the air temperature in Ukraine will gradually decrease starting from the beginning of the week.

Quote of the week; Benjamin Bodart from @CRMagri discussing this year’s wheat export market, "More than one in three tonnes exported in the world will be from the Black Sea region.”