Russia faces years of modest grain crop growth

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Russia, one of the world's main wheat producers, faces years of modest grain crop growth as farmers are struggling to boost low yields and get more land in regions with easy access to ports, SovEcon, Russia's leading agricultural consultancy, said.

The country, which exports grain to North Africa and the Middle East via the Black Sea, is highly likely to miss the Kremlin's 2020 crop target of 120-125 million tonnes, with 35-40 million available for export, SovEcon analysts said.

Rising export demand has seen Russia boost its harvest by about 27 million tonnes since the early 2000s by increasing the acreage for maize (corn) and for winter wheat in southern and central regions, SovEcon said.

"With the current regional and production structure of sowing, the pace of crop growth will be slowing," SovEcon chief executive Andrey Sizov told delegates at its conference of traders and producers.

To support growth, Russia should sow more in its Volga and Urals regions - with a good amount of available and affordable arable land - and should increase its yields, which remain on average 1.5 times lower than other grain producers, he said.

According to SovEcon, Russia's southern and central regions have very little extra arable land, and prices - up as much as 23 percent last year - are rising all the time.

The south, with its favourable climate and developed grain export infrastructure, has the most expensive agricultural land, and in the Krasnodar region average prices are $2,500 a hectare.

Taking these factors into account, SovEcon expects Russia to have a crop of about 110 million tonnes of grain by 2020 and about 120 million by 2025, up from 92 million in 2013, Sizov said. He did not provide an estimate for exports.

SovEcon said Russia may cut grain exports by about 2 million tonnes in the 2014/15 marketing year due to a smaller harvest.

It will be able to export 22 million tonnes of all grains in 2014/15, which starts on July 1, down from 24.1 million in the 2013/14 year, research data presented at the conference showed.

SovEcon raised its 2014 grain crop forecast to 88 million tonnes from a previously expected 86 million. Russia's agriculture ministry expects the 2014 crop to be 95 million.

The consultancy did not provide an estimate for the 2014 wheat harvest or 2014/15 wheat exports. Wheat usually accounts for about 60 percent of Russia's grain crop.

On the supply side, SovEcon sees Russia's 2014/15 grain imports flat at 1.3 million tonnes. Grain stocks are forecast at 11.8 million, including 1.6 million of government stock, at the end of the 2013/14 farming year - June 30.

By June 30, 2015, SovEcon expects stocks to have risen to 12.1 million tonnes and government stocks to match the previous year.

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