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Report Published: "Russia Agribusiness Report Q4 2013"

Fast Market Research recommends "Russia Agribusiness Report Q4 2013" from Business Monitor International, now available

 

Boston, MA -- (SBWIRE) -- 08/20/2013 -- We are very positive about growth potential in the Russian agricultural sector and see tremendous opportunities in the grains and dairy segments in particular. We view the livestock sector positively as well, even though the dominance of the market by domestic players and the high barriers to entry could limit investment and productivity gains in the medium term. WTO entry has not triggered major changes in government support to the sector, but we expect a small reduction in the overall budget allocated to the sector. Combined with lower farmers' income from the subdued 2012/13 season, this could limit the recovery in 2013/14.

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Key Developments

- Wheat production growth to 2016/17: 14.2% to 62.9mn tonnes. Yield gains and better access to export markets in Asia are expected to result in increased wheat production.
- Milk consumption growth to 2017: 0.3% to 12.0mn tonnes. This slight increase in consumption will most likely be aided by increased interest in coffee, as milk is a complementary good. Consumption of premium coffee as a niche-but-growing segment is demonstrated by the rapid growth of domestic coffee house chains.
- Poultry production growth to 2016/17: 62.9% to 4.6mn tonnes. This will come on the back of strong domestic demand and government initiatives to ensure a domestic production surplus. Specifically, the government is implementing programmes to improve the country's slaughter and processing capabilities.
- 2013 real GDP growth: 2.6% (down from 3.4% in 2012; predicted to average 3.7% over 2012-2017).
- Consumer price inflation: 6.8% year-on-year (y-o-y) on average in 2013 (up from 5.1% y-o-y on average in 2012).
- BMI universe agribusiness market value: -8.1% y-o-y to US$44.4bn in 2012/13, forecast to grow on average 4.8% annually between 2011/12 and 2016/17.

Industry Developments

We forecast the Russian wheat crop to rebound to 55.0mn tonnes for the 2013/14 season, largely due to yield improvements but also due to a larger area dedicated to wheat. Russian wheat production came in at 42.0mn tonnes in 2012/13, as dry and hot weather damaged crops in key growing regions such as the Volga Valley, the Urals and Siberia. This leads to a de facto ban on grain exports (due to uncompetitive export prices) and contributed to one of the largest global wheat market deficits (at 35mn tonnes) in several seasons. It also contributes to our forecasts for higher average wheat prices in 2013. The improvement in the 2013/14 Russian crop supports our view that the global wheat market will return to a surplus of 5mn tonnes for the 2013/14 season, which begins with the northern hemisphere harvest in June. This informs our view that wheat prices will moderate ahead of the harvest and ultimately average lower in 2014.

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