US officials highlighted the boost to Russian farming costs from economic setbacks as they forecast an 11% drop in the country’s grains harvest this year, led by a drop in wheat output.
The US Department of Agriculture’s Moscow bureau, in its first forecast for the Russian grains harvest this year, pegged it at 92.0m tonnes, below last year’s record harvest.
The decline reflects expectations of lower sowings despite a strong autumn planting season, which saw an extra 12%, or nearly 2m hectares more in area terms, seeded with winter grains.
The bureau highlighted the deteriorating financial conditions for producers, saying that “due to the rouble depreciation and high inflation, the cost of spring work and the cost of inputs skyrocketed in the spring of 2015, compared with the same period last year.
“Commercial financing of spring work and sowing deteriorated as the price of financing increased.”
‘Very unfavourable situation’
Indeed, the “poor general economic conditions, tight federal and regional budgets, high indebtedness of agricultural producers, depreciation of the rouble… and high interest rates, have all combined to create a very unfavourable situation for borrowing money”, the bureau said.
Interest rates for commercial loans had soared from 12-15% in mid-2014 to 24-26% or more by the start of 2015.
“Moreover, commercial banks sharply decreased lending to agricultural producers on commercial terms and increased requirements for collateral.”
Meanwhile, costs of inputs such as fertilizers and agrichemicals have soared, with ammonium nitrate prices up 32% year on year and Roundup weedkiller 44% more expensive, while prices of spring wheat seed are 50% higher and corn seed up 30%.
Wheat area for the 2015 harvest will, at 23.6m hectares, nonetheless end up in line with last year, helped by the strong autumn plantings and by the use of saved crop from last year to use as seed for spring sowings.
However, thanks largely to the reduced spending on inputs, yield prospects will be lower, leading to the prospect of a 53m-tonne wheat harvest this year, down 5.0m tonnes year on year.
Barley production will tumble by nearly 3.5m tonnes to 16.5m tonnes, the bureau said, citing reduced sowings and yields.
Meanwhile, corn output will drop by 1.1m tonnes to 10.0m tonnes, as while farmers “will plant approximately the same area as in 2014, due to increased prices of imported seeds, yields will be lower” as farmers use lower quality product.
On exports, the bureau pegged Russian wheat shipments at 19.0m tonnes in 2015-16, down 500,000 tonnes year on year, on its estimates, but still a historically high figure.
The bureau did not explain its forecast.
Total grain expected next season were pegged at 25m tonnes, in line with an estimate last week from Nikolai Fyodorov, the Russian agriculture minister.
Mr Fyodorov has pegged the overall grains harvest at potentially 100m tonnes, according to reports, while analysis group SovEcon has put the crop at 93m tonnes.