Russian farmers seek markets for grain with bumper harvest ahead

The Russian Grain Union has raised its harvest forecast for this agricultural year to 92 million tons from 85-90 million tons previously due to favorable weather, but the bumper crop means farmers will have difficulties in finding a market for all the grain, the union says.

“We are estimating the gross grain harvest at 89-92 million tons, if no natural disasters happen,” the union’s deputy head Alexander Korbut said, adding the forecast included 58 million tons of wheat.

Agriculture Minister Yelena Skrynnik said the ministry was likely to increase its grain export forecast to 20 million tons this year from 18 million tons.

The bumper harvest also means additional problems for Russia, Korbut said.  “The major problem is the price situation,” he said.

Local consumption stands at about 70 million tons and according to the statistics service, bread consumption in Russia has fallen by 5 kilograms per capita to 88-108 kg in the last three years.

Exports from Russia, once the world’s third largest grain exporting nation, were hit by a ban imposed last August by the government in response to rising prices after abnormally hot and dry weather destroyed over a third of Russia’s grain harvest and sparked fears of local shortages.

Egypt was forced to scramble to replace more than 500,000 tonnes of Russian wheat purchases after the ban, although Russian exporters bought grain at a loss elsewhere to honor Egyptian contracts, Korbut said.

The ban was lifted this July and Korbut said that in the first 20 days of the month Russia exported 1.4 million tons of grain, mostly wheat, more than the union had expected.

The grain union expects grain exports of 1.7-1.9 million tons in July and 2.5-3.0 million tons in August and September.

“Mistrust has become one of the factors driving last year’s price increases on the world market, because expectations of possible changes and restrictions have forced consumers to stock reserves, increasing the volume of purchases,” Korbut said. “The issue of trust between suppliers and producers has become pressing.” 

Exporters now have to offer discounts of $20-30 per ton to win their markets back.

“You must always pay to return,” said Korbut, adding it would take about two years to balance domestic and external prices.

Carryover grain stocks in Russia currently amount to 16.7 million tons, or 19.1-19.4 million tons including the small farms which produce about 20 percent of the country’s harvest.

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