Preparations for the 2009 grain harvesting season and initial harvesting operations
At present, spring crops have been sown over an area of 46.6 million hectares at all Russian farm categories, including spring grain crops and corn over an area of 31.2 million hectares.
Winter crops account for nearly 50% of gross annual grain output. In 2008, crops, due to be harvested in 2009, were sown over an area of 17.2 million hectares, an increase of 354,000 hectares on 2007.
As of mid-June 2009, winter crops were destroyed over an area of 506,300 hectares. This accounts for 2.9% of the area under winter crops in the fall of 2008 and is 300,000 hectares less than last year.
Considering the destruction of winter and spring grain crops, Russia is expected to harvest 85-90 million tonnes of grain and leguminous plants, as compared to 108.2 million tonnes in 2008. This year, corn harvests are expected to total 5 million tonnes, as compared to 6.7 million tonnes in 2008.
On June 19, the Southern Federal District started harvesting grain crops and leguminous plants. 1,001.000 tonnes of crops have already been harvested over an area of 209,800 hectares. The regional crop capacity is 4,770 kg per hectare.
The Ministry of Agriculture and constituent entities of the Russian Federation have signed agreements to implement measures stipulated in the State Programme for the Development of the Agriculture Sector and for Regulating Agricultural Produce, Feedstock and Food Markets in 2008-2012. Under these agreements, there are plans to spray 2.5 million tonnes of mineral fertiliser in 2009.
Increasing volumes of mineral fertiliser are being sprayed.
This amount will make it possible to prevent a further reduction in the nutrient balance. An additional 2.2 million tonnes of fertiliser must be sprayed in 2010 on 2009 in order to reinstate the 2007 nutrient balance. Consequently, at least 4.7 million tonnes of fertiliser have to be sprayed.
Under a cooperation agreement to meet the demand for mineral fertiliser among agricultural producers in 2008-2012 between the Russian Association of Fertiliser Producers (RAPU) and the Russian Agro-Industrial Union, RAPU sets maximum fertiliser delivery prices at January-June 2009 levels until late 2009.
A working group for monitoring compliance with the agreements and comprising representatives of RAPU, the Russian Agro-Industrial Union, regional agro-industrial sector management agencies and federal agencies, including centres and stations of the agro-chemical service of the Ministry of Agriculture, has been established in order to prevent fertiliser plants from overstating mineral fertiliser selling prices. A check conducted at the Nevinnomyssk Azot nitrogen fertiliser producer showed that corporate prices match the agreement.
In January-June 2009, domestic mineral fertiliser prices (less VAT) have matched those stipulated by the agreement.
Constituent entities of the Russian Federation need 1.7 million tonnes of mineral fertiliser for the 2009 spring season.
As of mid-June 2009, agricultural producers have bought 1,468.000 tonnes of mineral fertiliser.
Considering the 2008 balance, mineral fertiliser reserves totalled 1.71 million tonnes, or more than 100% of current demand.
Accumulated mineral fertiliser reserves for the 2009 spring sowing and harvesting season exceed 2008 levels by 92,000 tonnes.
According to the Ministry of Agriculture, the country now has 135,200 grain harvesters, 27,000 fodder harvesters, 57,800 mowers, 41,900 cutters-rowers, 31,300 pickup balers and 521,900 tractors. The technical readiness of grain harvesters and tractors exceeds 2008 levels by 1-2%. The technical readiness of cutters-rowers matches 2008 levels, while that of fodder harvesters, mowers and pickup balers is 1% less.
A total of 64.9 billion roubles' worth of federal funding is required to purchase and recondition all farming machinery throughout 2009, including 2.6 billion roubles to prepare equipment for the spring season.
Since early 2009, Rosagroleasing has delivered 9,148 tractors, 8,850 grain harvesters, 5,800 motor vehicles and 4,291 subsoil attachments.
Inter-regional bases and enterprises of Rosagrosnab have stockpiled material and technical resources worth over 650 million roubles for conducting repairs.
As of June 8, 2009, agricultural producers have bought 1.5 million tonnes of diesel fuel and 336,700 tonnes of petrol (106.9% and 87.1% on 2008 levels, respectively), according to the Ministry of Economic Development.
An agreement stipulating petroleum product deliveries to agricultural producers in line with January 15, 2009 prices was reached in order to provide agricultural producers with the required amount of petroleum, oil and lubricants during the March-May 2009 season.
On May 29, 2009, the Ministry of Agriculture and the Ministry of Energy reached agreement on recommended volumes of motor vehicle petrol and diesel fuel deliveries for the July-September 2009 harvesting season and fixed average wholesale discounts under free oil reservoir terms in roubles per tonne of petroleum, oil and lubricants.
Starting with June 11, the global grain market has stabilised. Grain prices are subsiding due to normalised agricultural and meteorological conditions in most producing regions and due to more optimistic forecasts for grain production for a number of countries.
Global grain export and grain exchange prices have declined due to the lack of price facilitating factors and more optimistic new harvest assessments for a number of major exporting and importing regions.
As of June 19, 2009, the global market charges the following average grain export prices:
The United States -- $202 per tonne, a decline of $4 in a week;
The European Union -- $190 per tonne, a decline of $4 in a week;
Russia exported 12.8 million tonnes of grain in the 2007-2008 agricultural year.
Average domestic consumption in the past few years is estimated at up to 75 million tonnes. Last season, Russia harvested an unprecedented 108.1 million tonnes of grain. This made it possible to considerably expand grain exports, which will total nearly 22 million tonnes, and to completely meet domestic grain demand.
Russian facilities can store 118.3 million tonnes of grain.
Grain exports increased and the grain export infrastructure continued to develop. At present, Russian ports can annually handle up to 20 million tonnes of grain.
Grain trains are primarily headed for Novorossiisk and Tuapse during the 2008-2009 season. Both ports can handle about 50% of national grain exports, or 11.6 million tonnes, including 11 million tonnes for Novorossiisk. Samur station will account for 6% or 1.3 million tonnes of Russian grain exports (to Azerbaijan).
Shallow water ports receiving cargo vessels with a capacity of up to 5,000 tonnes will export 8 million tonnes of Russian grain.
Despite substantial volumes, most grain consignments are delivered to these ports by lorries because of their proximity and much smaller volumes handled by each port as compared to Novorossiisk and Tuapse. Rostov-on-Don handles the largest grain export volumes (2.5 million tonnes), and is followed by Yeisk and Azov with 1.9 million tonnes and 1.6 million tonnes, respectively.
Grain traders do not own any bulk carriers.
The United Grain Company (OZK) has been established by the March 20, 2009 Presidential Decree On the United Grain Company.
OZK was established in order to create a major grain market player that will be able to compete with international grain companies expanding their presence in Russia.
The creation of a major national grain market company with a ramified elevator chain in most grain-producing and grain-consuming regions will create incentives for streamlining commercial grain flows primarily in favour of domestic consumers, including livestock-breeding farms and flour plants, and stabilising domestic market price trends.
Moreover, OZK's expanded potential to form large commercial grain batches would allow the company to bid at international grain purchase tenders and to export grain under CIF (Cost, Insurance and Freight) terms. This will increase proceeds from export.
The Federal Anti-Monopoly Service believes that the establishment of OZK on several regional grain markets, including the Volgograd Region and the Stavropol and Krasnodar territories, could thwart competition.
Moreover, the transfer of shares of port elevators located in any specific region to the company's charter capital could also hinder competition during grain transportation and handling.
90.7 billion roubles' worth of federal subsidies is stipulated as state support for agricultural production in 2009. As of June 1, 2009, 35.3 billion roubles, or 39% of annual limits, have been disbursed, including 20.1 billion roubles' (49.0%) worth of subsidies for compensating part of expenses to repay interest on investment loans taken out for a period of up to 10 years; 6.4 billion roubles (42.9%) for compensating part of expenses to repay interest on loans taken out for a period of up to 12 months; 2.5 billion roubles (41.5%) for promoting small agro-industrial businesses; 900 million roubles (20%) for supporting the plant-growing industry, including 400 million roubles for compensating part of expenses to insure agricultural crops and long-time forest plantations; under the federal target programme to preserve and reclaim fertile farmlands and agricultural landscapes in 2006-2010 and until 2012; 1.3 billion roubles (13.2%) for compensating part of chemicals purchase expenses.
Rosselkhozbank plans to issue 93.8 billion rouble loans for seasonal fieldwork in exchange for the 2009 harvest.
99.4 billion roubles has been allocated since the start of the spring season. Since early 2009, Rosselkhozbank has issued loans totalling 71.5 billion roubles.
