Russia: High dependence on grain in formulations means ongoing volatility in feed prices
The FAS team behind the latest USDA Grain and Feed Update on Russia expects feed consumption in Russia to be stable reflecting very moderate growth in production in the poultry sector.
The authors noted that while the Russian Feed Union is forecasting that feed production in Russia will continue to increase by 3-4% annually up to 2025, other industry experts are more circumspect, predicting a very moderate increase of a maximum 1-2%.
Production of compound feeds in Russia has been rising in the past few years. Output increased from 25.8 MMT in 2016 to 27.6 MMT in 2017, 6.9%, according to data from the Russian Federal State Statistics Service, Rosstat.
Feed prices
The share of grain in animal feeds in Russia is at 65 to 70%, compared to the EU average of just 40-45%, and because of the higher percentage of grain in Russian feed rations, large fluctuations in grain prices can severely affect feed prices.
For the small and medium sized enterprises (SMEs) in Russia buying compound feeds, the market outlook has been particularly unfavorable of late.
Inclement weather during spring planting, dryness in major grain producing areas during vegetation and an uneven pace of harvesting has resulted in decreased production of the major grains in Russia this year as well as lower yields, compared to last year.
In June 2018, the price for feed wheat, west of the Ural Mountains, was 28.5% higher than in June 2017, while the price of barley increased 31% year-on-year to 9,270 rubles (US$141) per MT. The corn price increased 24% percent to 9,425 rubles per MT, wrote the USDA team.
Average wheat and barley yields are down by 12 and 20% respectively, from 2017/18, they added.
Exports
The USDA Moscow office has decreased its July 2018 grain production forecast by 1 MMT to 108.9 MMT, and the analysts estimate that total Russian grain exports during MY2018/2019 will be 41.4 MMT or 3.9 MMT less than the previous forecast in July.
“As of October 2, 2018, Russian farmers have harvested almost 87% of all Russia’s area sown to grain, 38.4 million hectares. This is almost 2.3 million hectares less than the acreage harvested by the same date last year. “
Meanwhile, Russia’s Ministry of Agriculture reports that winter grain sowing is proceeding at a good pace where in some grain producing areas, such as Siberia and Altai, farmers have already planted more area for winter wheat than originally planned.
Premix and mineral concentrates sector
Although the domestic production of premixes and mineral concentrates is starting to climb, the country is still dependent on imports of raw materials, mainly for vitamins and amino acids, as well as for fermented preparations.
This need for imported inputs tends to increase the overall cost of feed in Russia.
From January to May 2018, the Russian ruble depreciated by 10% against the US dollar, which increased the cost of, imported feed components and led to climbing prices for feed.
Speculation over the availability of soy from South America also drove feed prices higher, added the USDA team.
In order to save the cost on feeds, they said the Russian Feed Union is encouraging producers to use improved and more balanced rations, to incorporate more food industry byproducts in feed formulations including corn gluten, molasses, dried sugar beet chips, brewing waste and distillers dried grains.
