Russia expecting good grain harvest in 2020
This winter’s unusually warm and dry weather has been favourable for Russian grain sowings. In 2020, the country intends to confirm its title of the world’s largest grain exporter and increase both harvest and export volume.
Russia’s winter grain crop is in unusually good shape with only 5,7% classed as in bad condition, reports bneIntelliNews citing the Ministry of Agriculture’s representative Roman Nekrasov. However, in North Caucasian Federal District the situation requires special attention, as more than 14% of winter grain sowings there are not doing well, the official said. Overall, 4% of the country’s sowings are in bad condition, which is twice lower than a year ago, according to the Hydrometeorological Centre of Russia.
In recent years, Russia has had good harvests due to increased state investment into the sector after the imposition of sanctions against agricultural imports from the EU. In 2017, the country collected an all-time record harvest of 135 million tonnes, while last year it amounted to 123 million tonnes. Grain exports have become a real moneymaker for Russia bringing about $20 billion in 2019. This year, the Ministry of Agriculture expects the harvest to grow by 2% year on year, while export volume is meant to reach $24 billion. The ministry’s long-term plan is to lift grain export earnings to $45 billion by 2024, said Minister of Agriculture Dmitry Patrushev in an interview last month.
According to VTB Capital, export volumes represent a core growth pillar for Russian agriculture. “In the 2020 marketing year, we see the grain harvest recovering 8% year on year to 122 million tonnes, underpinning the sizable 42,7-million-tonne export potential that is set to see an acceleration through the season,” the bank said in a note.
Good harvests are also helping to reduce inflationary pressure in Russia. At the moment, the share of food in the average Russian shopping basket is around 50%, while in more developed countries it totals 20-30%. In 2019, inflation ended at 3% partly thanks to a good harvest. According to the Russian Federal State Statistics Service, food inflation has been responsible for most of the fluctuations in the headline rate over the last four years.
In January, the Ministry of Agriculture said it might introduce export quotas to ensure sufficient supplies for the domestic market. The ministry aims to provide not only enough grain for consumers but also feed supplies for a flourishing animal husbandry sector. At the same time, pork production has increased to the point where Russia is almost entirely self-sufficient, so companies are beginning to export to more lucrative markets. “In poultry and pork, industrial production covers 84-89% of domestic demand,” said VTB Capital adding that greater foreign trade would be required for further capacity additions.
Agriculture is part of the Kremlin’s twelve national projects. Russia is going to spend $39,5 billion on developing rural areas by 2025. Almost half of this money is supposed to be allocated from federal funds.