Thursday, 21 May 2015

Why Ukraine and Russia official crop yield forecast might be optimistic

Around this time of year I receive requests to put my assessment on what I think crops in Ukraine and Russia will do.

I usually resist putting a yield figure on it as generally it would be a guess based on what other people have already said.

That is until we initiated Crop Tour.

Now that we are travelling around the grain belt looking at crops, walking fields, measuring and assessing plants we are starting to feel a little more confident that we could put a yield figure forward based on more than just a feeling.

Over the course of the last six weeks we have officially covered 5,800km in pursuit of Crop Tour, unofficially it’s probably nearer 8,000km as we assess crops going about our daily business.

That’s one of the pleasures of being a farmer, every journey is spent watching fields and farming systems role past the window and one of the reasons I prefer trains over planes.

I still have a bit more development to do before I stick my neck out and make a call on crop yield but before I do here's a review what’s been said over the last few weeks.

Ukraine are saying sowing and crop yield projections are normal and good with plantings forecast to be around the same as last year at 26mha and 90% of winter crops in good to satisfactory condition.

They are also saying everyone has sufficient seed, sprays and diesel and fertiliser is down only 8% on last year.

The USDA recently pegged Ukraine’s total 2015 yield at 55.3mmt which immediately received a rebuttal from the Minister of Agriculture Oleksiy Pavlenko who said it would exceed 55mmt adding that the Ministry will announce its own more accurate forecast after completion of the spring crop planting works, in the last week of May the first week of June.

Which he means that he doesn't know for sure, he hopes it will be more, his guys are telling him it will be, he’ll get back to you on that one.

I don’t understand why he contest it?  The more negative news about crops in general the more the market will react with favourable prices and if come harvest you do have more to sell well that’s just tickety-boo.

Anyway, my assessment is that all is not entirely tickety-boo in Ukraine’s garden.  I don’t buy the 90% is good line, we assessed 60% to be fair to good and while we might be a little harsh in our marking I don’t believe we are 30 points adrift.

What we saw was a lot of thin crops which will have bulked out in the recent warm wet weather but they are still thin crops; yield is a function of the number of ears in a given area and spring rains don't increase the number of ears.

I also don’t buy the fertiliser 8% story either.  During our investigations we kept hearing numbers of 30% and while it’s not cut and dried, knowing that fertiliser is THE single biggest crop cost then shortage of finance means it will be hit the most.

You can’t cut seed or you don’t have a crop, Ukraine’s pesticide usage is already low so there’s not much to trim there, you need a minimum of diesel to plant and harvest, what else is there to cut but fertiliser?

Across the border in Russia we hear a similar rose tinted story from the new Minister of Agriculture Alexander Tkachev sticking with a resolute 100mmt grain harvest.

He is saying that only the Volga, Siberian, and Ural Federal Districts showed some delays in plantings due to weather and he believes that agrarians will manage to plant spring crops in optimum terms. 

They’ll need to shake a leg then as each day delayed planting equates to a drop in yield and it will not be in optimum terms.  Not to mention the imminent yield sapping hot dry weather heading to southern Russia from Spain.

Over the last few weeks in addition to the Russian Ministry 100mmt figure I have heard 97mmt, 95mmt and a low from the USDA of 92mmt.

Whatever it turns out to be I don’t know anyone who thinks it will be 100mmt.

To finish off, Elizaveta Malyshko from UkrAgroConsult recently wrote that over the last 20 years Ukraine has faced severe crisis several times, but never (even in early '90s) was it followed by sharp reduction of grain acreage.

Now that's interesting.