Russian grain production: too much of a good thing?

Abstract

Russian grain production has increased substantially in recent years, reaching a record harvest of 135 million tons post-cleaning during the 2017–2018 agricultural year. By 2025, the Ministry of Agriculture expects harvests to reach 150 million tons on a consistent basis. This research note analyses Russia’s ability to absorb harvests of this magnitude, examining domestic consumption, transportation, storage capacity and export capacity. Significant increases in domestic consumption are not expected. Efforts are underway to expand storage and export capacity, but in the short term the grain infrastructural system is not adequate to handle successively large harvests. The consequences of oversupply could be falling domestic prices and financial difficulties for grain producers and traders.

Keywords:

• Russia
• grain production
• grain exports
• transport
• port capacity

Notes

1. An agricultural year is 1 July of one year to 30 June of the next year. During these four years, Russia was one of only four countries in the world with grain harvests of at least 100 million tons in each year. Brazil often reaches the 100 million ton level but fell short in 2016.

2. Soviet imports were comprised mostly, but not exclusively, of corn for animal feed.

3. The area of cultivated land has increased even as the crop insurance programme has experienced many problems. The purpose of the insurance programme is to protect against catastrophic loss. The insurance programme is largely supported by state subsidies to pay the majority of premiums. Even with state subsidies, during 2011–2015, the number of farm enterprises that entered into insurance agreements fell; the number of hectares that were insured declined by over 40%, fewer regions participated in the insurance programme and the number of companies that offer crop insurance contracted (Baymisheva & Kurmaeva, 2018). In 2017, a record drop in crop insurance occurred. The number of insurance contracts with state subsidies fell by 67%, and the area of insured land decreased by 68% (Dyatlovskaya, 2018b). Some of the decline was due to confidence of good weather, but some was also due to problems in the insurance system which had developed a reputation for not paying claims. As crop insurance became less popular, insurance in animal husbandry has showed upward trends.

4. Some unused land is being distributed to individuals as small plots in the Far Eastern hectare programme that spread to other regions. This type of land distribution has little relevance to grain production because allocations are one hectare per person, too small for grain production. Moreover, in the Far East less than 29% of land recipients use their allocation for agricultural production (Kvedomosti.ru, 2018a). In February 2018 the State Duma began to consider changing the Far Eastern hectare law to allow allotment of up to 10 hectares if the land is used for agricultural production.

5. Total population increased from 146.2 million in 2015 to 146.8 in 2017.

6. A longer view reveals a drop in bread consumption from 115 kilograms per capita in 2001.

7. During the early months of 2018 references to harvest losses of 40% began to appear in the specialised press but it is not clear where this number came from or how it is substantiated. I have seen no evidence to back up this claim.

8. Beginning reserves of 13.2 million tons, import of one million tons and domestic production of 120 million tons. Going into the 2017–2018 agricultural year, reserves increased to almost 20 million tons, including four million tons in the state intervention fund.

9. Egypt is the largest purchaser of Russian grain, followed by Turkey, Saudi Arabia, Bangladesh and Iran to round out the top five. During the 2017–2018 agricultural year, each of these nations bought more than one million tons of Russian grain.