Tuesday, 31 January 2017

Latest USDA weather update for western FSU

Dormant winter wheat remained insulated by a moderate to deep snowpack over most of the region.

Winter crop areas from central and northern Ukraine into central Russia remained covered by 10 to 60 cm of snow.

Southern portions of Russia’s Southern District (Krasnodar Krai), which had been devoid of snow cover, benefited from 2 to 5 cm of snowfall during the period.

Nevertheless, minimum temperatures (-16 to -11°C) posed no threat to dormant winter wheat in areas where the snow was shallow and patchy.

(Not sure why USDA weather update are not picking up on the lack of snow in southern Ukraine, see post below)

Latest USDA weather update for Europe

High pressure maintained dry albeit cold weather over much of the continent, though the weather pattern began to change by week’s end.

Winter crop areas of central and northern Europe were dry and cold (2-5°C below normal, up to 7°C below normal from southern Germany to the western Balkans), with a shallow to moderate snowpack (2-20 cm) prevalent from Germany into Poland and the Balkans.

Winter grains and oilseeds were dormant and mostly in good condition, with no damaging freezes reported in snowfree areas during the period.

By week’s end, showers (5-40 mm) arrived from the Iberian Peninsula into western England, improving soil moisture for dormant (north) to vegetative winter crops.

The rain was especially welcomed in northwestern Spain (Castilla y León), where a protracted spell of dry weather reduced moisture supplies for vegetative wheat and barley.

The rain’s arrival also signaled a pattern shift, as the recent dominant area of cold high pressure was replaced by Atlantic storms.

Russian and Ukraine wheat at risk from cold

Moscow based Institute for Agricultural Market Studies (IKAR) are reporting that a cold spell expected between January 27 and February 4 pose a risk to winter wheat in parts of Russia's southern regions of Rostov and Krasnodar.

Temperatures are expected to fall in Rostov and Krasnodar regions to -17C (1.4F) where the area is not currently protected by snow, according to the head of IKAR, Dmitry Rylko.

IKAR estimate upwards of 0.5mha in Rostov and 0.4 hectares in the Krasnodar are at risk.

Russian farmers planted 17.4mha of winter grains for the 2017 crop, up from 16.3mha the year before and both Krasnodar and Rostov are important wheat producing areas.

The latest satellite images seem to show some snow free areas although my contacts in the region are telling me there is generally sufficient snow about at the moment so I'm not sure how big an issue this might actually be.

Across the border in Ukraine, however, and the satellite images clearly show a snow free area across the southern regions of Odessa, Mykolaiv, Kherson and Crimea which on the face of it looks like a much bigger problem than in Russia.

I think we need to keep a close eye on the thermometer over the coming days and weeks.

Russia unlikely to repeat a record grain harvest in 2017

The President of the Russian Grain Union, Arkady Zlochevsky, has said that the 2017 general grain harvest in Russia will be high but will not reach the record level of the previous year.

His premise being that the condition of winter crops after the end of winter is a determining factor and in 2015-16 almost 100% survived while traditionally farmers lose 10-15% so it is hardly possible to rely on the same results this year.

I would agree with Mr Zlochevsky’s observation and add to it how rain during the rest of the season allowed that record amount of crop that survived the winter to go on and yield so well at harvest.

A perfect storm of weather conditions which is unlikely to be repeated this year.

Crops were in very good condition going into the winter (see our crop condition report) and despite some recent reservations about Krasnodar, right now they are all pretty much tucked up safely under an insulating blanket of snow.

Assuming nothing untoward happens between now and the end of winter (although there is still a lot of winter to get through so it could) then there should be a good foundation of winter cereals at the start of the season.

However I just don’t see that the rest of the season will be as conducive to crop growth as it was last year.

One look at the precipitation charts shows how unusual last year was and we are overdue a dry year, 2017 could be it.

We’ll be kicking off the first crop tour of the season in March to take an independent assessment of crop condition post winter with thoughts on yield potential, subscription details will be made available in the next few weeks.

US ready to negotiate on Ukraine organic wheat

The United States is ready to negotiate the supply of organic wheat from Ukraine according to Ukraine’s Minister of Agrarian Policy and Food.

During a TV interview the Minister said that US food is highly regulated and it is difficult to enter the market with new products but the US are ready to negotiate on organic wheat.

The Minister said that it takes time to convert land to organic which is not a problem in Ukraine as land is not so contaminated.

I might be getting the nuance of his translation wrong here but if that is what he said then I’m not entirely sure he understand how conversion to organic or organic standards work.

In line with previous announcements the Minister went on to stress that the although Ukraine currently produce and export a small amount of organic products compared to the organic world market, the future for Ukraine organic market is very large.

I couldn’t agree more but let’s hope the Minister understands how the organic market works or someone appraises him very soon otherwise when he finds out you can use sprays and fertiliser on organic farms he’s going to have a fit.

According to Ukraine’s Agricultural Ministry, Ukraine currently cultivates about 400,000 hectares of organic land and 80% of organic products are exported.

Monday, 30 January 2017

Russia consider restricting imported pesticides

Russia is considering applying control measures on importation of plant protection products (pesticides) into the customs territory of the Eurasian Economic Union (EEU).

In a meeting last week at Russia’s analytical centre, it was noted that between January and October last year, imports of pesticide products increased by nearly 21% compared to 2015 and continues to grow.

Import customs duty rates for pesticides are currently set at the highest level allowed under World Trade Organisation rules.

Representatives from the analytical centre said there is a need to develop a document that will reflect the requirement to restrict pesticide imports in to the country.

They go on to say the document should help to protect the interests of domestic producers of plant protection products, while preventing the import of counterfeit products which seems to be confusing two issues – protectionism and counterfeit products.

I’m not entirely sure if they are just brainstorming in line with the current policy on import substitution being extended to technology or how a document may be translated in to direct action but the idea seems clear enough and the implications could be wide reaching.

As a minimum I think we can expect to see a tightening of the regulations and procedure (and cost) that imported pesticides will have to go through before being registered for use in the EEU.

Ukraine improves its corruption ranking

Transparency International has released its annual Corruption Perceptions Index in which Ukraine scored 29 out of a possible 100 points, which is good news and not so good news.

The good news is that it is an improvement of two points compared to last year which shows the anti-corruption reforms that Ukraine has implemented is having some impact.

Transparency International noted positive changes in reduced abuse in government office, the police, and the armed forces and greater accountability of public procurement.

The not so good news in that Ukraine is ranked 131 out of 176 countries in the world corruption rankings with Transparency International saying the justice system remained at the same level of corruption as in the Yanukovych era.

They cited the absence of asset recovery from the Yanukovych regime and his allies as vivid evidence for that.

The problem is that Ukraine needs to improve its corruption rating to allow inward investment.

At the moment the massive amount of finance that Ukraine desperately needs is locked just out of reach by cooperate governance and due diligence.

An institutional investor carries out his due diligence and the risk from corruption is deemed as too great which stops the investment happening.

Improving Ukraine’s corruption perception rating is crucial in allowing inward foreign investment at the levels that the country needs and when it does we should start to see some big things happen particularly in the agri sector.

Friday, 27 January 2017

Turkey wheat production down 11%

Very dry weather in Turkey has caused concerns after wheat planting was finished, however rain and snow in the first week of December has alleviated dryness and helped crop development.

Total wheat production is forecast at 17.3mmt in MY 2016/17, down about 11% compared to last year due to drought in Central Anatolia.

The Turkish Grain Board procured nearly 4.5mmt of grain in MY 2016/17 while concerns on devaluation of the Lira will likely impact import decisions.

Kazakhstan to increase corn output

Kazakhstan plans to improve the profitability of its grain industry by 30% to 40% over the next four years according to officials from the central Asian country.

The policy is to introduce new state grants, approve new organic standards, cut down on wheat cultivation while increasing corn and soybeans.

They also aim to enrol 670,000 small agricultural farmers into cooperatives who will then be able to access further subsidises.

Seems like a great idea to redirect support from big business and make it available for smaller farmers assuming it does contribute to the target improvement in profitability which I suspect it won’t.

Organic appears to be  flavour of the month in Ukraine and Russia as well as Kazakhstan which usually happens when politicians take an interest in farming and advisors and experts show them the numbers and they then can’t believe why more farmers haven’t ditched the sprayer and converted to organic en masse (it’s because they don’t have internationally recognised organic standards and the market is beyond reach in Europe).

I’m not sure restricting wheat production is a good idea, it’s one commodity they do export in significant quantities and having experienced the climate and soils of Kazakhstan I’m not sure I’d advise growing those crops, anyway I thought Khrushchev’s disastrous virgin lands policy of the fifties had demonstrated that corn wasn’t a good idea.

Kazakhstan, Ukraine and Russia all appear to be maintaining or increasing agricultural subsidies at the same time that UK farmers are, in all likelihood, facing significant reduction or even cessation of financial support altogether.

Theresa May might want to give that some thought while she’s talking with Donald Trump this afternoon.

We plan to include Kazakhstan in our spring crop assessments during this years crop tours if we can raise sufficient funds to cover costs, drop me a line if you would like more detail and would be interested in supporting our work blackseacroptour@gmail.com

Thursday, 26 January 2017

Russia has adopted agriculture budget for 2017

Russia has agreed and adopted its agricultural budget and priorities for 2017 at 214 billion roubles ($3.34 billion) which is about 1.6% of the total federal budget of 13.48 trillion roubles ($211 billion).

State support remains focused on reducing the cost of capital and creating incentives for private investments to the sector.

The Government plan to spend 91.7 billion roubles on the “Encouragement of Investment in Agriculture”, which includes investment credits, CAPEX reimbursement for pre-selected projects and subsidised loans for agricultural producers.

A second program called the “Development of Sub-Sectors in Agriculture” has 55.3 billion roubles allocated to priorities including dairy cattle farming support, grain and vegetables production and support of the regional agricultural development programs.

The third sub-program “Irrigation and Land Improvement” has 11.3 billion roubles allocated with a further 7.1 billion roubles allocated to “Supporting the General Conditions of Agricultural Operations”.

Ukraine’s Agriculture Minister sees restoring irrigation as key

Ukraine’s Minister of Agriculture, Taras Kutoviy attended the Global Forum for Food and Agriculture conference in Berlin last week where he raised the perennial Ukrainian suggestion that to increase grain production it is necessary to restore the old soviet era irrigation system.

The Minister said "With the restoration and development of irrigation systems, Ukraine will have opportunities to increase grain production to 100mmt per year (from current 60mmt) and to increase food sufficient to [feed] 400-500 million people.”

Those figures are optimistic and the Minister is putting a lot of faith in irrigation, but it seems the Ukraine government is on the way to securing cash as, with agreement of the World Bank, they have established a coordinating council to develop a strategy to renovate and modernise the irrigation system.

The approved strategy will form the basis of any agreement with the World Bank for finance which the Minister anticipates will begin in 2017.

I might have got this wrong in translation but the Minister appears to be talking of an investment in the order of two billion USD to restore irrigation over 550,000 hectares by 2021, which is an astonishing amount of money.

The Minister clearly has experts who buy in to irrigation, particularly if they can access some of that World Bank finance but in my opinion this is the wrong direction to take Ukraine farming.

I would argue the best investment Ukraine can make is teaching farmers how to grow dryland crops by measuring available water, establishing yield potential, adjusting inputs accordingly and implementing minimal cultivation and direct drilling techniques.

It would be more effective than irrigation, further reaching, significantly less to implement than two billion USD and I know someone who is already doing it in Ukraine with great success.

Ukraine harvest 26mmt of corn

USDA report Ukraine has officially finished harvest of all grains with around 420,000 ha of corn still left under snow and uncut in Poltava, Sumy, Chernihiv and Kharkiv.

Corn stands up pretty well to the Ukrainian winter although I wouldn't recommend leaving extensive areas to be harvested in the spring.

The USDA estimate for 2016 Ukraine corn is recorded as a tentative 26mmt which is up around 3mmt or 11% on 2015 but down on 2013 and 2014.

It's worth keeping in mind corn plantings in 2013 and 2014 spiked as the government policy at that time encouraged planting of corn to increase exports and to generate foreign revenue.

So if anything the hectares planted in 2015 and 2016 has probably returned to the trend before government "policy" skewed numbers upwards.

Ukraine’s organic production increased 90% in five years

Ukraine’s organic sector is in the news this week with the Minister of Agriculture opening the snappily titled first International Congress "Organic Ukraine 2017. Organic market development in Ukraine - from production to implementation."

The Minsters opening speech highlighted Ukraine’s organic sector has grown 90% in the last five years although 90% of very little is still not much but it does perhaps indicate a trend particularly now the government has identified organic as one of the key pillars for development.

I don’t think I would be giving anything away if I was to say I was a bit of fan of organic farming; it’s a great marketing opportunity for farmers around the world and it makes us question how we farm in the conventional systems which always has to be a good thing.

I used to teach an undergraduate module on organic farming in the breadbasket region of the UK and it would be fair to say I had my work cut out.

It was a challenge to get participants to even consider that organic farming could be an opportunity for some and that if their neighbour converted to organic it wasn’t a threat to their business so they should probably best just calm down a bit.

The usual argument was that we won’t be able to feed the world with organic produce because the yield just isn’t there.

Well yes and no.  Organic wheat in the UK might yield considerably lower than a conventional system but that’s not necessarily the case in somewhere like Ukraine where the yield penalty would be small because conventional farming already is, in the main, a low input, low output extensive system.

And as we invest into organic farming research we will develop new techniques and technologies that will improve yields, it's not magic it's science.

Ukraine currently cultivates about 400,000ha of organic land and the Minister believes this will increase several fold on the back of increasing demand for organic produce.

He might just be right.

Wednesday, 25 January 2017

Latest USDA weather update for western FSU

Dormant winter wheat remained insulated by a moderate to deep snowpack over much of the region.

Winter crop areas from central Ukraine into central Russia remained covered by 5 to 60 cm of snow.

However, southern portions of Russia’s Southern District (Krasnodar Krai) remained devoid of snow cover, though minimum temperatures (-10 to -5°C) posed no threat to dormant winter wheat.

Latest USDA weather update for Europe

A broad area of high pressure maintained dry albeit cold weather over much of the continent, though a stationary storm system brought heavy rain to some Mediterranean coastal locales.

Precipitation over Europe’s primary winter crop areas was light (less than 5 mm), though somewhat heavier showers (10 mm or more) were reported in northern France and England.

Winter crops over central and northern Europe were dormant, with a shallow to moderate snowpack (2-20 cm) prevalent from Germany into Poland and the Balkans.

However, snow cover remained patchy and shallow (2 cm or less) in the northern Danube River Valley, though these areas were spared any additional damaging freezes during the past week.

Farther south, temperatures up to 4°C below normal slowed the development of vegetative winter wheat and barley from the Iberian Peninsula into Italy.

In northwestern Spain, readings locally at or below -10°C may have caused some localized burnback or freeze damage.

More importantly, short term drought continued to adversely impact crop development in northwestern Spain (Castilla y León), where 60-day precipitation has totaled less than 50 percent of normal.

In contrast, crop prospects across the remainder of the Iberian Peninsula remained favorable due to heavy late-autumn rainfall.

Meanwhile, a stationary storm system over the central Mediterranean Sea triggered moderate to heavy rain (25-130 mm, locally more) from southeastern Spain into Greece, causing localized flooding and hampering citrus harvesting.

Monday, 23 January 2017

Thaw continues to place Ukraine winter crops at risk

The latest satellite image from Ukraine is showing the area of snow melt now includes central regions along with the southern regions first highlighted by us last Tuesday.

The latest satellite image is not entirely cloud free which makes it tricky to see the full picture but it does appear to show the thaw has spread.

Temperatures are reasonably benign right now but forecasts are indicating little snow fall and night time lows of -22C (-7F) by Thursday.

I don’t think we are looking at catastrophic crop failure but the crop is exposed and at an elevated risk should temperatures drop very low for any length of time which they can still do right into March.

Needs watching closely.

G20 agriculture ministers meet

The G20 agriculture ministers met in Berlin yesterday with the aim to produce concrete recommendations for action to “provide essential building blocks in order to secure the world’s food supply," according to Germany’s Minister of Food and Agriculture, Christian Schmidt.

The G20 agriculture ministers’ summit is the first ministerial meeting of Germany’s G20 presidency which started in December 2016 with Minister Schmidt emphasising the importance of agriculture.

"Without agriculture, issues of global stability such as sustainable food security cannot be solved. This is why we need to strengthen sustainable agriculture and rural areas around the world, and this is what I will strive towards under the G20 presidency", declared Schmidt.

During the summit, Minister Schmidt met with his Russian counterpart Alexander Tkachev to discuss trade restrictions caused by the sanctions policy.

The Russian food embargo is set to expire at the end of 2017 but now the US have a new President who has been pretty unambiguous about his views on Russia may mean we see trade relations returning to normal before then.

The G20 states represent 60 per cent of the world’s agricultural land.

Thursday, 19 January 2017

Belarus to maintain exports to Russia at current levels

Belarus plans to keep the amount of food produce it exports to Russia in 2017 at the same levels as last year according to BelTA, the state-owned national news agency of the landlocked Republic.

The head of foreign economic affairs at the Agriculture and Food Ministry, Alexei Bogdanov, said that Russia will remain a high-priority trade partner and the strategy is to preserve the volume of supplies reached in the previous years while looking to diversify the range of meat and dairy products.

The Ministry representative then, slightly at odds with his previous statement praised Russia’s import substitution policy as the right thing to do noting that Belarus did the same thing a couple of decades ago.

I spent some time in Belarus a couple of decades ago, I recollect import substitution was because the country was stone broke.  (I also recall a late night boozed soaked dinner in what turned out to be a dark, freezing cold abattoir but that's a story for another time). 

In a parting reference to Russia’s spurious suspension of various Belorussian meat and dairy products throughout 2016, Mr Bogdanov said that not a single country had complained about the quality and safety of our products.

In 2016 Belarus exported products to 58 countries including Africa, Singapore, the Philippines, Bulgaria, Serbia, Israel and the US.

Latest USDA weather update for western FSU

Dormant winter wheat remained insulated by a moderate to deep snowpack over much of the region.

Winter crop areas from central Ukraine into central Russia remained covered by 10 to 50cm of snow.

However, a second consecutive week of warmer-than-normal weather (2-4°C above normal) kept southern portions of Russia’s Southern District (Krasnodar Krai) snow free, though mild minimum temperatures (-6 to -1°C) posed no threat to dormant winter wheat.

Latest USDA weather update for Europe

A slow-moving storm brought widespread snow to dormant winter crops in central and eastern Europe, while dry conditions lingered in southwestern growing areas.

In Spain, sunny skies and near-normal temperatures were favourable for vegetative winter wheat and barley.

However, localized but pronounced short-term drought continued to adversely impact crop development in northwestern Spain (Castilla y León), where 60 day precipitation has totalled less than 50% of normal.

In France - where similar dryness has been noted over the past 60 days - 10 to 25mm of rain improved moisture reserves for dormant to semi-dormant winter crops.

Meanwhile, widespread snow (5-25cm, locally more) insulated dormant winter grains and oilseeds from Germany into Poland and the Balkans.

However, snow cover remained shallow and patchy in northern Serbia and western Romania, where additional burnback or freeze damage was possible from temperatures as low as -19°C.

Chilly weather also prevailed across the Mediterranean region; for the second consecutive week, hard freezes in typically warmer Mediterranean coastal areas may have caused some damage to sensitive specialty crops.

Has Ukraine inadvertently engineered a fertiliser shortage?

Here’s an interesting one; Ukraine is currently debating whether to impose or delay the introduction of anti-dumping duties on Russian urea and urea-ammonium nitrate (UAN) until after parliament passes a bill concerning zero nitrogen fertiliser duties for other countries.

Arguably it would make sense for Ukraine to try and protect its domestic fertiliser industry from its neighbour dumping cheap imports by imposing duties and making them less competitive.

However Ukraine’s Ministry of Agricultural recognises that it may be necessary to suspend anti-dumping duties on Russian imports until after the Verkhovna Rada approves the bill to avoid possible negative consequences for agriculture; which I take to mean a shortage of fertiliser for the coming season.

The scenario being that Ukraine impose duties on Russian imports which reduces the supply before freeing up a replacement supply from elsewhere by passing the zero duties for other countries bill.

The anti-dumping duties on imports of urea and UAN from Russia are set to be introduced in February for a period of five years and the zero duties bill was endorsed by the government committee and sent to central executive agencies for approval which I have no idea how long takes to be ratified.

But it seems entirely possible that Ukraine could shoot itself square in the foot by engineering a shortage of fertiliser for the coming season that would impact negatively on the 2017 crop yield.

Worth keeping a close eye on this story.

Wednesday, 18 January 2017

Russia sign preferential lending agreement for farmers

The Russian Ministry of Agriculture and the state agricultural bank, Rosselkhozbank, have signed an agreement on the implementation of preferential crediting for agricultural enterprises.

The Minister of Agriculture said "The introduction of a new mechanism for concessional lending at the rate of 5% will facilitate the access of farmers to loans."

He goes on to say that farmers will no longer have to wait for subsidies and divert working capital to pay interest on the loan, except they will, albeit at 5%.

The new agreement will allow banks to provide loans to farmers at a rate of not more than 5% per annum and will simplify the process of obtaining government support for farmers.

The bank is owned 100% by the government so this is essentially a farm subsidy or given that the government will earn a revenue from the loans, a tax.

Having said that, obtaining finance in Russia can cost 20-30% so a 5% preferential rate could be a good thing for Russian farmers.

Depending on the terms.

Russia plans to build seed potato production

Russia’s Minister of Agriculture, Alexander Tkachev, reckons it will take five to seven years to develop domestic seed potato production sufficiently to be able to replace imported seed stock.

Speaking at a meeting on Monday about the development of potato breeding the Minister said imported potato seeds currently supply around 80% of the demand.

"We need to thoroughly understand what seeds work with our farmers, what potential is available for domestic selection and how we should build our work with research institutions to five to seven years, [so] Russian farmers could use mostly domestic potato seeds" said the Minister.

Russian seed potatoes resources currently include 409 varieties of which 209 are from Russian breeding and 200 of foreign selection.

According to the Ministry of Agriculture's analytical centre, most of the domestic potato varieties are not used by agricultural producers due to their low competitiveness and most successful domestic breeding varieties do not reach the farmers due to a lack of mechanisms to promote them.

The Minister also acknowledged that while the demand for ware potatoes is almost entirely supplied by domestic production, early spring potatoes are imported from other countries.

About 80% of the Russian potato crop, which reached 3mmt in 2016, is grown on small farms.

Ukraine: 60% of winter wheat varieties are strong

In Ukraine there are currently 320 varieties of winter wheat included in the State Register of plant varieties with 204 identified as strong and suitable for commercial use.

To put that into context the UK has about forty wheat varieties on its current recommended list.

According to the Director of the Plant Production Institute of Ukraine, the number of wheat varieties approved for cultivation has increased 10 times compared with 1990 which is said like it's a good thing.

The Director goes on to say that the average yield of wheat grew from 3.3mt/ha to 8.4mt/ha which I presume he means the potential under trial conditions because he does acknowledge that commercial grain productivity is realized not by more than half which is bit of an understatement.

Despite the best efforts of Ukraine’s seed breeding institute’s wheat yields are, in real terms, no better than when Rick Astley was all over the radio singing Never Gonna Give You Up.

Tuesday, 17 January 2017

Some Ukraine crops now at risk of winter damage

After reporting the Ukraine Ministry of Agriculture’s announcement only yesterday, that prevailing weather conditions and adequate snow cover does not pose a threat to winter crops, I get sent this picture from Mykolaiv region of southern Ukraine taken this morning.

Just goes to show the importance of real time reporting and how you can’t beat a boots on the ground perspective.

Looking at the latest satellite pictures and the thaw seems to have occurred over most of Odessa and half of Mykolaiv oblasts, a combined area of around 4.5mha.

There’s no snow forecast for the next ten days and with night time lows of -12C (10F) predicted we just might start to see some crop damage, in the least those crops are now at an elevated level of risk.

One thing that is for certain, we’ll be sure to include Mykolaiv and Odessa in our crop condition assessments come March.

Monday, 16 January 2017

Russia has restored the status of FMD-free country

Russia was restored its status as a country free from foot and mouth disease (FMD) without vaccination, except in the Vladimir region.

The Director General of the World Organisation for Animal Health (OIE), Monique Eloi, informed Russia’s veterinary and phytosanitary service, Rosselkhoznadzor, by letter last week.

In the letter she said they had studied the report from the Russian side to contain FMD in Vladimir region and concluded that they comply with the Veterinary-Sanitary Code relating to the establishment of a disease containment zone in the country.

Russia had requested the evaluation of the establishment of a containment zone following an outbreak on 20 October 2016.

The containment zone is the Vladimirskaya Oblast and will be effective immediately.

Ukraine's grain harvest reached a record 66 million tonnes

According to preliminary statistics released by Ukraine’s Ministry of Agriculture today, the production of grain and leguminous crops in 2016 was 66mmt.

This is a record harvest in the history of Ukraine and 5.9mmt more than in 2015.

Overall, the total average yield was 4.61mt/ha and consisted of the following.
  • wheat 26.0mmt with a yield of 4.21mt/ha;
  • corn almost (their reporting not mine) 28mmt with a yield of 6.60mt/ha;
  • barley 9.4mmt with a yield of 3.30mt/ha;
  • sunflower 13.6mmt with a yield of 2.24mt/ha;
  • soybean 4.3mmt with a yield of 2.31mt/ha;
  • sugar beet 13.9mmt with a yield of 48.2mt/ha;
  • potatoes 20.9mmt with a yield of 16.0mt/ha.
Some good results there but still room for improvement.

Ukraine winter crops in good condition

Prevailing weather conditions in Ukraine does not pose a threat to the state of the winter crops according to the Ministry of Agriculture.

They report that adequate snow cover in most areas provides sufficient protection despite low temperatures at the end of the first part of January.

They then go on to say that of the 7.2mha planted and 6.8mha emerged, 5.6mha or 83% are in good and satisfactory condition with 1.2mha or 17% in poor condition.

Which is only slightly misleading as what they should be saying is of the 7.2mha of winter crop planted, 77% is in good condition, 17% is in poor condition and 6% failed to establish.

To be honest these mid-winter crop condition announcements are all but meaningless as the crop is sitting under a blanket of snow and no one can tell what’s going on until the spring thaw when we can get out and carryout proper crop condition surveys.

Although according Ukraine’s weather service large amounts of snow will provided sufficient moisture to aid a possible good harvest but at the same time they are suggesting more very cold weather is yet to come.

Friday, 13 January 2017

Latest World Agricultural Supply and Demand Estimates

If I was a farmer chasing markets and I used WASDE numbers as a guide I’d be tempted to drop my wheat area for 2016/17 which is too late for the winter crop but not spring plantings, increase corn and spring barley, drop sunflowers and up soya.

An alternative strategy is to assume that's what everyone else will do and therefore do the exact opposite.

Probably best not to go chasing markets.

Develop your strategy, form a plan, execute in a timely and accurate manner and hope it works sufficiently well to keep farming through to next year.

Anyway, here are some highlights from the report;
  • U.S. 2016/17 wheat ending stocks are up and projected to reach the highest level since the late 1980’s while this seasons winter wheat plantings have dropped 1.51mha year on year to 13.11mha, the lowest since 1909.
  • Global wheat supplies for 2016/17 are raised 1.3mmt on a production increase that is partially offset by lower beginning stocks.  The largest increases are for Argentina, Russia, and the EU. 
  • Global exports are raised 1.2mmt led by increases for Argentina, Australia, and the EU, partly offsetting is a reduction in Canadian exports so far this year.
  • Global use for 2016/17 is raised 0.1mmt with increased food use partially offset by a reduction in feed and residual use. 
  • With total global supplies increasing faster than use, ending stocks are increased 1.2mmt to a new record of 253.3mmt
  • US 2016/17 corn outlook is lower production, reduced feed and residual use, increased corn used to produce ethanol, and smaller stocks. 
  • Global corn supplies are down 1.27mmt driven by falling US stocks.
  • Global coarse grain production for 2016/17 is forecast 1.7mmt lower.
  • Russia barley production is lowered based on the latest government statistics. 
  • Argentina barley production is lowered on dryness during crop heading and grain fill in November and December.
  • U.S. oilseed production for 2016/17 is estimated down 1.5mmt from last month.
  • The 2016/17 global oilseeds supply and demand estimates include higher production and exports compared to last month. 
  • Oilseed production is projected up 0.1 million tons to 554.8 million on increases for cottonseed, rapeseed, and sunflowerseed partly offset by reductions for soybeans and peanuts. 
  • Soybean production is lowered 0.2 million tons as increases for Brazil and China are offset by declines in Bolivia, Uruguay, and the United States. 
  • The largest change to production is a 2.0-million-ton increase to 104.0 million for Brazil, where beneficial rain has resulted in improved yield prospects. 
  • Global oilseed trade is projected at 160.3 million tons, up 0.4 million from last month. 
  • Global oilseed stocks are projected at 93.7 million tons, down 0.9 million, mainly on lower soybean stocks for the United States.

Thursday, 12 January 2017

Ukraine record sugar export

Ukraine’s sugar exports reached 466kmt in 2016, a record quantity since the country became independent in 1991.

The Ministry of Agriculture report that as of yesterday all refineries have completed the production season.

Ukraine’s production season started on August 20 and employed 42 sugar factories.

In total Ukraine produced 2.0mmt of sugar in 2016 from 13.6mmt of sugar beet, which is 40.5% more than the previous year.

Kyrgyzstani produce banned from Kazakhstan

Can’t quite get to the bottom of this story but Kyrgyzstan is no longer allowed to transport goods to Russia by road through the territory of Kazakhstan.

The ban, which came into effect on 1st January, seems to have been issued by the Kazakhstan Ministry of Agriculture but it’s not clear why other than it’s a ban on road and air transport of goods subject to veterinary control through Kazakhstan but they can carry out transport of goods by rail.

It would appear, on the face of it, to be politically motivated rather than genuine phytosanitary or biosecurity reasons, otherwise why would you have a ban on air transportation and not rail?

Wednesday, 11 January 2017

Ukraine to purchase new grain cars in 2017

Ukraine’s Minister of Agriculture along with heads from the State Property Fund and the First Deputy Prime Minister (who is also the Minister of Economic Development and Trade) held a workshop on Ukrainian-Chinese investment projects.

Participants discussed the purchase of much needed grain cars to aid internal transportation of grain to ports for export.

The meeting reported the positive agreement to allocate funds in 2017 to purchase 500 grain cars with a further 1,000 in 2018 and 1,500 in 2019.

The head of the Ukrainian Grain Association had previously reported that Ukraine needs a minimum of 5,000 new grain cars a year and the head of the state railway network operator, Ukrzaliznytsya, said about two-thirds of their 11,650 grain wagons are already operating way beyond their intended lifespan.

What wasn't clear from the meeting was if the positive agreement to allocate funds would actually translate into the actual purchase of rolling stock.

Latest USDA weather update for Europe

A stationary area of high pressure maintained dry albeit cold weather across western portions of the continent, while bitter cold caused winterkill in the northern Balkans.

Sunny skies and below-normal temperatures were favorable for overwintering wheat and rapeseed in France and western Germany.

Dry, chilly weather also prevailed across the Mediterranean region, promoting seasonal fieldwork but slowing winter grain development.

However, freezes were noted in typically-warmer Mediterranean coastal areas, threatening specialty crops from eastern Spain into Italy and Greece.

Farther inland, moisture remained limited for vegetative wheat and barley in northern Spain, with localized but pronounced short-term drought continuing to adversely impact barley and wheat development in Castilla y León.

Farther east, widespread snow fell from southern and eastern Germany into most of eastern Europe, though Hungary and adjacent portions of Serbia and Romania missed out on the snow.

As a result, dormant winter crops were protected from readings below -20°C (locally less than -25°C) across much of central and eastern Europe.

However, snow-free areas of the northern Balkans likely suffered widespread burnback and winterkill due to extreme cold (-22 to -18°C), with the greatest likelihood of significant freeze damage noted in Hungary and northern Serbia.

Latest USDA weather update for western FSU

Dormant winter wheat remained insulated by a moderate to deep snowpack.

However, warmer weather (2-4°C above normal) melted the snow cover in southern portions of Russia’s Southern District (Krasnodar Krai), though another round of snow was approaching at week’s end.

Winter crop areas from central Ukraine into central Russia remained covered by 10 to 40 cm of snow.

Tuesday, 10 January 2017

Ukraine has exported over 23 million tons of grain

Ukraine’s Ministry of Agriculture report this morning that as of the beginning of January the country has exported 23.07mmt of grains in the current marketing year, up 1.44mmt on the same period last year.

The projected 2016/17 supply of grain is 71.6mmt, of which 64.2mmt is from production, 7.1mmt carryover and 0.37mmt imports.

Individual crop supply includes 29.1mmt of corn, 28.8mmt of wheat, 10.1mmt barley, 0.45mmt rye, 0.197mmt buckwheat and 3mmt of other crops.

The Ministry estimate 23.5mmt is required for domestic consumption and 40.2mmt is available for exports of which 23.07mmt has already been shipped leaving 17mmt left for the rest of the marketing year.

Monday, 9 January 2017

Black Sea weather risk for crops

Holiday season continues in the Black Sea so news is thin on the ground unlike the snow that has fallen across most of the region.

Low temperatures at the end of last week and over the weekend had a few commentators talking of possible crop damage but snow falls since have provided sufficient insulation that this really shouldn’t be a problem.

Temperatures which had fallen as low as -25oC (-13oF) have now lifted and are forecast to remain cold but well above anything that would harm crops for the rest of the week at least.

Snow continues to fall adding further insulation and crops are pretty much protected from anything the winter can throw at it.

The weather to watch out for will be spikes in temperature in late January and February causing a partial thaw followed by a sudden drop in temperatures; we can see some real damage happen then.

Friday, 6 January 2017

Why it's unlikely Russia will reach its 2020 wheat export target

With an all-time record wheat crop of 73mmt safely in the bag it’s worth taking stock and looking at what the future might hold for Russian grain exports.

Russian agricultural policy has been unambiguous since they introduced a ban on food imports from the EU, United States, Norway, Canada and Australia in August 2004.

Pretty much everything coming out of the Ministry of Agriculture has been focused on import substitution, increasing productivity, pushing hard on exports by upping subsidies for farmers, returning idle land back in to production, building more green houses, using more intervention and price support or increasing state support for machinery manufacturers.

And it seems to be working; pig production up 13%, greenhouse vegetables up 33%, milk production up 1.9%, farmers bought 11% more fertiliser and now this year’s record wheat crop which has encouraged the Minister of Agriculture to target 50mmt exports by 2020.

So how does a government come up with a production target?  It seems to involve an element of wishful thinking, aspiration and plucking a number out of the air.

In this case I think we can clearly see that 50mmt was reached by drawing a straight line from 2012 through 2016 to 2020.

The only issue with this is scenario is it requires perfect linear growth over the next four years which is highly unlikely.

Russia reached a record crop in 2016 because it rained at the right time and the country is now overdue a difficult season as in 2010 and 2012 when severe drought and extensive crop failure led to export restrictions and the government calling force majeure on existing contracts.

I’m not predicting Russia will see catastrophic crop failure next season, indeed the winter crop is in good condition as we saw on our November crop tour, but you don’t need yields to drop very much before that 50mmt target starts to look a long way up.

I know that past performance is no indication of future trends but assuming the government policy remains bullish on exports then it’s likely we will continue to see exports rise but 35mmt possibly 40mmt by 2020 is probably a more realistic target.

Kazakhstan grain harvest up 20%

This year’s Kazakhstan grain harvest reached 23.7mmt, up almost 4.0mmt or 20% on last year with an average total grain crop yield of 1.54mt/ha.

The Kazakh Minister of Agriculture reported the harvest will fully cover domestic demand leaving an export potential of 8.5 to 9.0mmt consisting mainly of wheat but also a small amount of barley.

Kazakhstan is in the world’s top ten wheat producers growing high protein spring planted milling quality but with the short growing season are highly dependent on rainfall to produce viable yields.

The upshot is that despite relatively stable plantings of 12-13mha, production and consequently exports fluctuate from season to season with highs of 11mmt and lows of 5mmt in recent years.

The current marketing year grain exports stand at 7.9mmt, up 12% on the previous year.

The Kazakh government are keen to support farming and in 2013 the Ministry of Agriculture released a Master Plan for “The stabilisation of the grain market” through to 2020 setting various goals and targets such as increasing crop production by 30%.

One key policy that is of interest is the government want to reduce milling wheat hectares in favour of feed grains presumably to convert in to meat, milk and eggs for added value exports.

Having spent the last two days on line watching the UK’s Oxford Farming Conference and the lack of any detail as to what will happen to farming post Brexit (the Secretary of State for Environment, Food & Rural Affairs actually said we don’t have a policy), the idea of a central Master Plan seems rather appealing.

Thursday, 5 January 2017

Russia has increased its grain export capacity

Growth in the Russian agricultural sector increased from 2.6% last year to around 4% in 2016, helped by a record grain harvest of 119mmt including 72mmt of wheat.

Russia is now expected to become this seasons world’s top wheat exporter with the government reporting they have ramped up the grain export capacity to 45mmt and will now focus on developing infrastructure in areas away from the ports.

Russia has supported the development of its port capacity as the government aims to drive production to 150mmt by 2030.

When Russia first started to export grain in 2002, the transhipment capacity was 5mmt, if Russia boosts its grain crop to 150mmt then it would have 50mmt available for export compared with 35 million tonnes in the current marketing year.

Ukraine's organic production takes another step forward

Ukraine’s Cabinet of Ministers voted to support a law on the general principles and requirements of organic production, handling and labelling.

Organic production is one of Ukraine’s priority agricultural policy areas but it was recognised that the main constraint for the development of the sector and access to world markets was a lack of regulatory and legislative framework.

The global market for organic produce is now estimated at $80 billion with the US and EU accounting for about 80% of the demand therefore it makes perfect sense for any country or indeed farm business to consider the marketing opportunity that organic production affords.

Ukraine is well placed to capitalise on that opportunity both in terms of market location right next door to the EU and warm water ports providing export opportunities to the US, and the suitability of land to organic production.

Ukraine’s farm land has been virtually organic by default in as much as inputs have been low over the last few decades leaving it in a better position to start organic farming.

What has been missing is the assurance that what you are buying is indeed organic; this new law won’t change that overnight but it is a step in the right direction and illustrates an intent of Ukraine’s agricultural policy.

Throw in a bit of sexy marketing and I can see a time in the not too distant future when we will all be buying organic breakfast cereal made from healthy Ukraine grains naturally sun ripened out on the open steppe.

Wednesday, 4 January 2017

Latest USDA weather update for western FSU

Dormant winter wheat remained insulated from potential bitter cold by snow cover.

Primary winter crop areas from central Ukraine into southern and central Russia remained covered by 5 to 20 cm of snow, while northern crop areas (Russia’s Central and Volga Districts) were under 10 to 25 cm of snow at week’s end.

Black Sea agribusiness news; drop the dead donkey

A return to work for many this week, nursing hangovers and that dreaded back to school feeling that even as fully formed adults we can never quite manage to shrug off, while trying to access emails and websites with forgotten passwords and “where has the send button gone?” feeling of frustration.

Meanwhile the sensible people of Russia and Ukraine have just started their festive party season, writing off January preferring to stay indoors avoiding travelling or any excessive strain during the coldest part of the year.

To that end the agribusiness news out of the Black Sea region is fairly scant, mainly consisting of re-hashed stories, pre-Christmas press releases and an item about a donkey.

The EU officially renewed sanctions against Russia for six months until July 31, 2017.

Ukraine exported record volume of grains in 2016, up 13% compared with the previous year while the Ministry of Agriculture raised its grain export forecast for the current marketing year from 40.2mmt to 41.6mmt due to increased corn export estimates.  

The corn export forecast was increased from 17.2mmt to 18.5mmt.

Belarus 2016 milk production was an all-time record for the landlocked country who were able to satisfy domestic requirement and export to Africa, Singapore, the Philippines, Bulgaria, Serbia, Israel and the US.

Kazakhstan grain production reached 23.7mmt, almost 4.0mmt more than the previous year which will allow for export levels up to 9.0mmt while the state set goals of increasing crop production by 30%.

A farm in northern Serbia produces cheese made from donkey milk that costs €1,000 per kilogram because there are only 100 Balkan donkeys that can be milked for cheese and each jenny is hand-milked three times a day.

A Russian energy company is negotiating to purchase the farm for an estimated at €1 million.