Russia’s 2015 grain crop under pressure

MOSCOW, Russia (Reuters) — Russia’s grain crop may fall short of official forecasts by up to 100 million tonnes this year.

Andrey Oleynik, managing director of a large agribusiness in Russia, said the condition of winter grains in some key growing regions has deteriorated since last year.

The country has been pushing farmers to harvest a large crop this year after a near-record 105 million tonnes last year to cover domestic demand and replenish state stocks after the ruble’s plunge spurred exports.

Basic Element’s agribusiness contributes only a small fraction of the country’s crop — 211,000 tonnes of wheat and barley last year — but it operates in the Krasnodar region, which is key for exports. As a result, the company offers a unique insight into crop conditions there.

“I think the harvest will come in a range of 70 million to 85 million tonnes (of grains),” Oleynik said.

“Winter grains were not in a very good condition after winter, but the weather has favoured us and their condition has improved.… We hope that the harvest will be flat in the Krasnodar region this year. However, in Volgograd and Rostov the situation is worse and one is unlikely to expect farmers to re-sow much of the lost winter grains in spring as access to loans has become tougher.”

Russia saw the ruble slide 43 percent against the American dollar last year because of tumbling oil and western sanctions over Ukraine.

The sanctions closed western debt markets to most Russian companies and banks, boosting local interest rates on loans, while ruble weakness has lifted the costs of imported inputs, such as seeds and fertilizers.

Oleynik said prices for some imported inputs rose 50 to 200 percent.

The government has been investing in Russia’s agriculture sector, but the sector is far from covering domestic needs.

Oleynik stopped short of criticizing the state program, but said the company sends proposals to the agriculture ministry.

He said a state program to develop seed production in the country was needed, along with cheaper and longer loans.

Along with crop production, Basic Element’s agribusiness includes dairy and animal farms, a sugar refinery, grain elevators and seed production facilities. Its 2014 revenue rose nine percent to $150 million.


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