IKAR in Mass and Industry Media

Russian farmers weigh cuts to wheat planting as profitability falls

Reuters

MOSCOW, March 22 (Reuters) - Russian farmers say they are considering reducing wheat acreage in favour of higher-margin crops like soybeans and peas as low global prices, rising input costs and continued export duties cut into harvests' profitability.

Russia, the world's largest wheat exporter, expects a bumper grain harvest of 147 million tons in 2024 and analysts said they did not see potential cuts as a significant threat to the 2024 crop, in which higher-yielding winter wheat plays a key role.

Data from state statistics service Rosstat cited by Russia's grain union (RZS) show the profitability of grain production fell to 23.9% last year from roughly 70% in 2022.

The profitability of wheat fell to minus 0.9% compared to more than 70% in 2022, according to RZS.

Spring wheat profitability is likely to be zero or negative, while winter wheat profitability may average about 15%, said Salis Karakotov, head of Shchelkovo Agrochem, a large pesticides and seeds company.

"We realise that we're going into a nosedive," said Tatyana Malina, the executive director of AgroGard, which operates in central and southern Russia.

"We are seeing an increase in costs for absolutely all of our inputs ... We are, of course, losing profitability," she told an industry conference in Moscow last week.

Russian agriculture minister Dmitry Patrushev said on Thursday this year's spring sowing campaign is proceeding about twice as fast as last year.

Agriculture consultancy Sovecon estimates the pre-harvest crop of spring wheat has fallen by 0.1 million hectares to 13.0 million as farmers try to switch from wheat to other crops.

Prices for domestic third-class wheat fell to 11,500 roubles ($125.57) per ton last week from 12,500 roubles ($136.49) at the beginning of the year, according to Sovecon. Export prices from the Russian Black Sea port of Novorossiysk fell from $242 a ton FOB in mid-January to below $200 in early March, according to IKAR agriculture consultancy.

"Now we are in a very bad sideways movement, at ultra-low, unusually low price levels," said Dmitry Rylko, head of IKAR.

The low wheat prices are putting strain on farmers.

"Last year we had record yields of wheat, chickpeas, flax and sunflower. And despite this, the profitability of the agro holding's overall production has decreased," Roman Bondarev, an operations director of a major agricultural holding in Russia's south told the Moscow conference.

Experts say there is growing interest in more niche crops, such as chickpeas, flax and sugarbeet.

A farmer in the Voronezh region said he would plant more soybeans.

"This is forcing farmers to look at more marginal crops and change their crop rotation," Nikita Tokmakov said.

Export duties introduced to protect the Russian domestic grain market are also reducing profitability, but the agriculture ministry has said it has no plans to cancel them.

($1 = 91.5830 roubles)

22.03.24

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