Friday, 24 February 2017

Farming, a game of two halves; Leicester City Football Club and Black Sea farming

Leicester City Football Club sacked their manager, Claudio Ranieri.

For those of you who don’t follow English football; Claudio Ranieri took over management of LCFC in 2015 and achieved the most outstanding and historic event in any sport by taking perennial bottom of the table strugglers to win the championship that very season.

Ranked 5000/1 outsiders at the start of the season the affable Italian understood his team's strengths but more importantly, their weaknesses. 

He recognised they couldn’t compete against the giants of the premier division on football skills only so he didn’t try. 

He identified his team’s strength was running, more accurately sprinting over short distances and his squad had some of the fastest sprinters in the league so he capitalised on that.

He encouraged his team to defend strongly letting the other teams play possession but when they slipped up his guys were ready to pounce and out sprint the opposition to score more goals and win more games over the course of the season.

Apparently his team drank beetroot juice shots as its proven to make you run faster and all his guys had to do was run slightly faster than everyone else.

It worked, LCFC were crowned 2015-16 champions on the English Premier league, Ranieri was feted as a genius, given loads of accolades and signed a new four year contract.

Role on this season and his team are looking at relegation as they flounder at the bottom of the table after losing game after game after game.

What went wrong? Probably many things but the main issue being the other teams studied the bejesus out LCFC and formulated a counter strategy to cancel out their competitive advantage.

What didn’t happen was Ranieri woke up at the start of the season and said to himself, “you know what, from now on I’m going to go into work every day and do everything in my power to lose every single game.”

Yesterday the LCFC board decided the only course of action was to sack Ranieri.

Now the funny thing about football is if a team has a long run of losing games they will, statistically, have a run of winning games, even if the manager does nothing.

But what happens is that after a poor run, the board, galvanised into doing something, decide to sack the manager, there is no other course of action, they can’t sack the players, not all of them anyway, who’d play the game, they can’t sack themselves because that would be stupid, we can’t be to blame, surely.

The only candidate left is the manager, so he gets the boot, usually just after the board gives him their full support and backing.

The team then go on to have a winning streak which statistically they were going to do anyway; the board see this as exoneration, they were right, that’s why they are on the board, Champagne, Stogies and pay rises all round boys.

At this point you might be thinking, hang on, isn’t this supposed to be a blog about Black Sea farming, indeed it is, the connection being that this is the same scenario played out every season in the world of Black Sea farming.

Expat farm managers are brought in to change the old soviet way of farming and to drag the business into the 21 century and it’s a difficult job I can tell you.

Farming is tricky at the best of times, weather and global commodity markets means that much of what we do is actually outside our control, what we are trying to do is reduce and mitigate the externalities as much as we can.

On top of that every day you have a thousand fires to put out, corruption, theft, dodgy deals, sabotage, funds not arriving on time, government policy, politics, banks, lawyers and so on.

Then, after a couple of dry seasons, low yields, poor results, the board start looking around for someone to blame, they can’t sack the tractor drivers, who’d drive the combines, they can’t blame the board, that would be stupid, so who’s left?

Black Sea farming businesses don’t fail because managers are going into work each morning thinking how can I balls this up today, they fail because the understanding and comprehension of the beautiful game of farming is often not fully understood or appreciated by those in charge.

Thursday, 23 February 2017

USDA January weather summary for western FSU

In January, dormant winter wheat was well insulated by a moderate to deep snowpack over central and northern portions of the region.

However, southern Russia dealt with fleeting snow cover, though the coldest weather was coincident with sufficient snow insulation.

Precipitation averaged near to above normal in Ukraine as well as western and northern Russia (mostly falling as snow).

In contrast, dry weather (20-60 percent of normal) was reported in the Russia’s Southern District, but the lack of agricultural activity minimized the impacts of the dryness.

Overall, soil moisture reserves remained adequate for spring growth.

Latest USDA weather update for western FSU

Winter wheat remained adequately protected from bitter cold by snow cover over most of the region.

Minimum temperatures as low as -25°C across central portions of Ukraine and Russia had no detrimental impact on dormant winter wheat due to a moderate to deep snowpack (10-50 cm).

In southwestern Russia, a shallow - albeit still sufficient - snow cover (5-15 cm) protected winter wheat from nighttime readings as low as -18°C.

Overall, wheat continued to overwinter in good condition in Ukraine and Russia.

Latest USDA weather update for Europe

Warm, dry weather prevailed across much of Europe, though chilly conditions lingered in eastern portions of the continent while rain continued on the Iberian Peninsula.

An area of high pressure centred over the Balkans maintained dry, increasingly warm weather (2-7°C above normal) from England and France into Germany, Italy, and the western Balkans.

Weekly average temperatures greater than 5°C for a second consecutive week indicated winter crops broke dormancy up to a month ahead of normal in northern France and several weeks ahead of normal in England.

The warmth also reduced wheat cold hardiness in Germany and likely encouraged some early greening in western-most portions of the country.

Colder-than-normal conditions (up to 3°C below normal) lingered over the Danube River Valley, ensuring winter wheat and rapeseed remained dormant in these southeastern growing areas.

Dry weather prevailed from northern France into Poland, though some light showers (1-8 mm) accompanied a weak disturbance from central France into southern Poland.

While winter dryness does not cause the types of impacts associated with warm-season drought, pronounced 90-day precipitation deficits prevailed from France and Germany into the northern and central Balkans.

Meanwhile, another in a series of Atlantic storms triggered widespread moderate to heavy rain (5-60 mm, locally more) across much of the Iberian Peninsula, maintaining good to excellent prospects for vegetative winter wheat and barley.

Crimea to produce more milling wheat

Crimea plans to increase the production of grade 2 and 3 wheat according to the Minister of Agriculture of the Republic of Crimea.

According to the Minister, last year’s wheat harvest produced mainly grade 4 and 5 wheat which is not in demand so Crimea must develop the production of grade 2 and 3 wheat for export and domestic use.

Crimean agrarians need to realise all required agricultural works to receive a good wheat harvest, said the Minister, demonstrating a lack of understanding as to how farmers produce milling grade wheat.

The main reason Crimea produced more feed wheat last year was because it rained a lot, there’s only so much farmers can do to produce and protect protein.

Wednesday, 22 February 2017

This week's Black Sea agribusiness news in brief

Russia’s Deputy Minister of Agriculture said they have approved 15 regional banks of the 27 applications submitted for participation in the new mechanism for concessional lending to farmers.

The Minister reported they had carried out all the necessary work to bring state support to agricultural producers and that the regions should sign agreements with the Ministry as soon as possible.

He went on to make sure he was covered by saying that if agreements are not signed in the coming days the regions will not be able to receive funds intended for farmers, although he failed to mention that this possibly could have been wrapped up before Christmas rather than days before farmers start spring planting.

As of January 1, 2017 Russian grain stocks were reported at 38.9mmt which is the fourth month in a row of the highest grain stocks (y-o-y) in the last 7 years.

High stocks are because of the record grain crop (Russian state statistics preliminary data is 118mmt) and a slower pace of exports than last year.

Russia has approved subsidies that will partially compensate the construction of pig farms, modernisation of agricultural facilities, irrigation and soil improvement of agricultural land and sturgeon farming.

The Russian government clearly recognise the importance of agriculture to the economy but what’s not clear is if this level of support is above what has been available in the past.

Saudi Arabian investors Al Ramez International Group will finance a poultry farm project worth €85 million in Kazakhstan.

Construction is scheduled to begin in March 2017 and will have an estimated production capacity of 30,000mt of poultry meat a year.

In 2017 the Kazakhstan Ministry of Agriculture plans to create 220 milk receiving points (dairies?), 54 slaughter houses, and family-run feedlots for 244,000 cattle head a year.

Kazakhstan’s National Managing Holding KazAgro JSC plans to provide $186 million to finance this spring’s sowing operations.

KazAgro’s finance company, KazAgroFinance, say that $80 million will come from public funds with $106 million from other sources, so, if you fancy investing in Kazakhstan’s agricultural infrastructure, now could be your chance.

Reports are emerging that variable temperatures have led to the formation of an ice crust on Ukrainian fields which killed up to 30% of the barley crop but oddly not wheat or oilseed rape.

Ukrainian farmers have been talking about an ice crust since late December but no one I talk to is unduly concerned and winter crops are still under snow, so any reports on winter kill or estimated yields (the first USDA estimates are out later this week) is purely speculation.

The only sure fire way to assess crop condition is to go and have a look yourself once the snow thaws, or, if you don’t fancy that, you can subscribe to our Black Sea Crop Tour service and we'll do it for you.

And finally, Novosibirsk is ready for the VIII All-Russian Winter Rural Games.

The Director of the VIII All-Russian Winter Rural Games reported that all preparations are now ready for the games which will open in the city of Berdsk, Novosibirsk region on 2 March.

The program includes cross-country skiing, polyathlon, kettlebell lifting, chess, checkers, mechanics, milking and for the first time in the history of the Winter Games, mini-football.

Tuesday, 21 February 2017

Black Sea Crop Tour 2017 latest update

It’s been quiet on the Black Sea so far this week, not much to report which suits me as I am busy preparing and planning for the start of our crop touring season.

I’m keeping a close eye on the satellite images waiting for snow to clear then I’ll leave it ten days or so to give the crop time to green up as it makes observations easier rather than looking at brown fields.

In the past, weather conditions meant it was April before we started touring in earnest although I am hoping this year we will be up and running during March.

I’m not anticipating any major issues on post-winter crop condition this year as on the whole the winter has been fairly kind but there are a few regions where snow has been absent in southern Russia and Ukraine that we will want to take a closer look at and there are reports that an ice crust in Ukraine might start to do some damage if it doesn’t thaw soon.

As in previous years we will cover a representative route and call in on a few farms during the trip and I will give a running commentary with video and pictures on a subscriber’s only twitter account so you will be able to follow us in real time.

This year we are planning on making more use of videos and drones which we hope will help communicate crop condition better.

At the end of each tour I will post subscribers a written report of our findings and assessments with our predictions on what crop yields might be.

This will be our third full year of touring the Black Sea region and are grateful for all the support we have received in the past.

We are the only independent crop assessment service operating in the Black Sea region and rely entirely on subscriptions to make it happen.

If you like to support us and access our independent findings then please email me to register your interest.

blackseacroptour@gmail.com

Last year’s Twitter account is now open @BSCT_01 where you will be able to find videos, pictures and commentary from the 2016 season and last years full reports are also available, email me and I will forward them to you.

Thursday, 16 February 2017

Mid-week Black Sea agribusiness news

The first train load of Kazakhstan wheat has been delivered to the Far East China port of Lianyungang from where it will be shipped to Vietnam by sea.

This is the first Kazakh wheat to be delivered to Southeast Asia through China and it is estimated will take 20 days which compares favourably to wheat delivered from Australia which takes 30 days.

Kazakhstan intends to export about 500kmt of wheat to Southeast Asia through China in 2017.

Mexico and Russia have concluded a preliminary agreement on the resumption of Mexican meat deliveries to Russia according to the Mexican Agriculture Minister.

In December 2012 Russia's Veterinary and Phytosanitary service limited meat exports from Brazil, Canada, Mexico and the United States due to the content of a banned feed additive ractopamine.

Mexico said they could start delivering 400,000mt of meat to Russia in the near future.

Ukraine made had a robust presence at Europe’s largest organic trade show, Biofach, in Nuremberg, Germany this week with 15 Ukrainian companies showcasing there organic produce.

Ukraine’s Deputy Ag Minister was in attendance and noted that the Ukrainian organic farming is a relatively young sector with 400,000 hectares currently under organic production and over 200 certified producers but that exports had grown 14 times in the last two years.

Ukraine’s agricultural exports reached USD 15.2 billion in 2016 , up USD 4.0 billion on 2015 and accounted for 42% of all exports.

Agricultural imports amounted to USD 3.8 billion, leaving a positive balance of foreign trade in agricultural goods of USD 11.4 billion.

Ukraine to increase soya production, says Minister of Agriculture

Ukraine's Minister of Agriculture said Ukraine will increase in soya production.

The Minister said that soya production increased 20 times in the last ten years and 2016 was a record harvest for the crop at more than 4mmt.

Actually production increased five times and exports by six in the last ten years so on this occasion the Minister has been somewhat “over briefed”, but it is true to say production has increased as it has with all the major crops in Ukraine.

Soya is a tricky crop to grow in Ukraine, it’s more technically demanding and temperamental to weather conditions than wheat, corn or sunflower.

Getting the split application of broad leafed and grassweed herbicide timing is critical as is inoculating the seed accurately and the fertiliser regime which despite what everyone advises in Ukraine, often does need some nitrogen.

Growing GM soya alleviates the weed control option but although GM soya is grown, it is illegal and as Ukraine aligns itself closer to the EU that's more likely to become an issue than not.

Seed tends to be more expensive than other spring crops so all in all I don’t see soya production increasing significantly in Ukraine, while there is the capacity to grow more, four to five million tonnes production is probably the limit for now.

The Minister also mentioned organic soybeans as an area for development which begs the suggestion, will we start to see the production of organic GM soya in Ukraine?

Wednesday, 15 February 2017

Argentine soya plantings down 3%

Rain during late December and January in Argentina’s major soybean growing region slowed the pace of planting.

Argentine farmers had planted around 90% of the crop by early January but wet conditions stopped any further progress.

During January the primary cropping region had received up to 75% above the average rainfall and although drier weather developed by the end of the month it came too late to finish planting.

In contrast, rains largely missed the southern Buenos Aires and La Pampa region which deterred farmers there from planting into dry conditions.

The upshot of this and an increase in corn and sunflower plantings means the Argentine Ministry of Agriculture are reporting a reduction in soybean area for 2017 by more than 3% to 19.8mha.

The USDA have also lowered its 2017 forecast of soybean harvested area by 450,000ha to 19.0mha.

Although hectares are down, the crop that has been planted is reported to be in good condition so the final harvested 2017 yield might yet still be up on last year, when late season flooding led to much more crop than is usual not being harvested.

Ukraine to compensate farmers for buying Ukrainian machinery

Yesterday the Cabinet of Ministers approved the decision to compensate farmers for buying Ukrainian agricultural machinery and equipment by 15% of the value.

The announcement is light on detail but it appears that farmers who purchase Ukrainian machinery in 2017 will be compensated 15% of the value if the 35% of their machinery is locally produced.

What is referred to in the announcement as the “localisation level” which I take to mean how much locally produced equipment you own, will rise to 45% in 2018, 55% in 2019 and 60% in 2020.

The Prime Minister said "We want to maximize equipment produced from Ukrainian components” and “This will enable us to create thousands of jobs in the sector and related sectors”.

I can already see a few holes in this policy, like the price of locally produced machine rising by 15% and the shifting ownership of imported machines between companies to hit the necessary “localisation level”.

Tuesday, 14 February 2017

Latest USDA weather update for western FSU

Winter wheat remained adequately protected from bitter cold by snow cover over most of the region.

For a second consecutive week, minimum temperatures as low as -30°C across central portions of Ukraine and Russia had no detrimental impact on dormant winter wheat due to a moderate to deep snowpack (10-60 cm).

In southwestern Russia, a fresh snowfall (5-15 cm) protected winter wheat from nighttime readings as low as -20°C.

Overall, wheat continued to overwinter in good condition in Ukraine and Russia.

Latest USDA weather update for Europe

Warm, wet weather in southern Europe contrasted with dry, increasingly cold conditions in the north.

A strong area of high pressure over Scandinavia maintained dry, chilly weather (1-5°C below normal) from Germany and the Low Countries into Poland and the Baltic States.

While much of the northern Europe snowpack has melted, there were no incursions of bitter cold during the past week; consequently, dormant wheat and rapeseed continued to overwinter in satisfactory condition.

Meanwhile, a series of Atlantic storms marched east before being deflected south across the Mediterranean Sea, triggering widespread moderate to heavy rain (10-70 mm) across much of western and southern Europe.

The showers in England and France improved moisture reserves for dormant winter crops following a drier-than-normal autumn.

Farther south, the rain was beneficial for vegetative winter wheat and barley in Spain and Italy, while snow in the mountains improved spring runoff prospects for irrigated summer crops.

Does Russia have a wheat quality issue?

Russia’s Ministry of Agriculture say there is sufficient volumes of high quality milling grain.

A spokesman from the Department of agricultural markets said that he did not expect any problems with deficit of high quality milling grain in the country.

In June and July of last year I travelled the Black Sea grain growing region and reported that I had never before seen so many lodged cereal crops across Russia.

At one point I drove over 1,700km and saw lodged crops all along a route from Stavropol in the south to Moscow in the north.

It reminded me of the UK in the 1980’s when high nitrogen rates and heavy headed wheat crops fell over all the time until the likes of the HGCA started to do some research into why and more importantly, how to stop it.

Several decades later and a combination of plant breeding, growth regulators and better fertiliser recommendations made lodged crops in the UK all but a thing of the past while in Russia, low fertiliser rates, short straw and small, light ears meant you hardly ever saw it, that was until the summer of 2016.

The difference in 2016 was rain; precipitation through the stem elongation period encouraged crops to grow tall until they reached a tipping point when, encouraged by wind and rain, they just fell over.

The generally accepted result of which would to be a drop in grain quality yet all through this marketing year, like again today, the Russian Ministry of Agriculture have resolutely reported that grain quality is not an issue.

Although wheat exports have started to pick up the pace, they have been slower than expected with analysts citing low prices as the reason why farmers have been slow to let go of their stocks.

Despite the Ministry announcements, I’m starting to wonder if perhaps there might be a quality issue after all.

Monday, 13 February 2017

Black Earth Farming initiate liquidation

Black Earth Farming has entered into agreement to sell its Russian operations and announces intention to propose distribution of proceeds to shareholders and initiate a voluntary liquidation of the company.

Black Earth Farming was established in 2005 and produced cereals, oilseeds and vegetables over 149,000 hectares in central Russia although the land bank is recorded as 256,000 hectares.

According to Black Earth Farming’s website news release, the wholly owned subsidiary, Planalto Enterprises Limited has agreed a share purchase of its indirectly wholly owned subsidiaries Agro Invest and Agro Invest Regions and an assignment agreement pursuant to which Planalto assigns its claims under the intergroup loans to Agro Invest to Volgo-DonSelkhozInvest LLC.

The total estimated purchase price is given as USD 184 million.

Black Sea agribusiness news

Russia is actively fining agri businesses for violations of land legislation, namely not farming land and allowing it to fall into disrepair.

Last week two business in Penza and Voronezh were fined 400,000 roubles ($6,800) each for land that was described as “completely overgrown with trees and shrubs” and “100% weeds (couch grass, wormwood) and wood vegetation”.

Russia is bringing land back into productive use to support food production as well as targeting land that is not being farmed as part of their import substitution policy.

Russian farmers have purchased 20% more fertilizer than the same point last year prompting many analysts to suggest this will support another bumper harvest in 2017.

According to the Ministry of Agriculture the price of urea and ammonium nitrate is down 9% and 11% so it might just be farmers are taking advantage and stockpiling early.

Kazakhstan plan to reduce the wheat crop by more than two million hectares according to the Deputy Minister of Agriculture (normally harvest around 12mha of wheat each year).

Kazakhstan are looking to increase the value of exports by adding value to commodities by processing them.  Part of that policy is to grow crops other than wheat but this has been deride in some quarters as wheat exports have been one of the success stories in the past.

According to the Deputy Minister, reduction of the planted areas will not mean a drop in grain production as farmers will harvest even larger volumes of high-quality grain throughout a smaller areas.  No problem then.

USDA have just dropped their 2016 wheat production figures for Kazakhstan to 15mmt, down from an earlier forecast of 16.5mmt on the back of government statistics.

USDA have revised upwards Ukraine’s grain exports forecast for 2016/17 by 1.5mmt, to 40.4mmt on the back of 800kmt more wheat and 700kmt more corn.

The very low temperatures in the Black Sea last week appear to have passed with the rest of this week looking benign from a crops perspective.

It’s too earlier to assess the impact of the cold weather but there are certainly some areas of southern Ukraine and Russia that had thin or no snow cover during periods of very low temperatures.

We will be carrying out our independent crop condition assessments in March, I’ll be publishing details on how to subscribe and access our findings shortly.

Thursday, 9 February 2017

Ukraine’s Minister of Agriculture meets World Bank

Ukraine’s Minister of Agriculture is meeting with representatives of the World Bank today to discuss the current state of the forest industry in Ukraine and the need for comprehensive reforms.

The Minister said that reform of the forest sector is one of the priorities of the Ministry but it is controversial and difficult in terms of social tension, with many opinions, discrepancies and misinterpretations.

He went on to say that international experience is important and hopes the World Bank will be the synergistic platform for actions in reforming the industry.

Just how controversial can forestry be and does it really need the international experience of the World Bank to sort it out?

And of all the issues in Ukraine, is forestry really a priority?

Those are rhetorical questions.

Latest crop estimates for Argentina

I don’t often talk about countries outside the Black Sea but I am thinking about expanding my area of interest to include Brazil and Argentina, primarily as an excuse to visit and do some crop touring, so for the second time this week, here’s another post on South America.

The latest USDA Foreign Agricultural Service (FAS) report on Argentina has been released ahead of today’s latest WASDE figures. 

The FAS report is compiled by USDA staff who are in country and presumably have a better feel for the situation so I tend to take a bit more notice of these reports rather than the big numbers coming out of Washington.

The FAS estimation of Argentina’s 2016/17 wheat crop is 15.0mmt with exports of 8.6mmt, quality is considered to be good, far better than the past two crop seasons.

Barley production for 2016/17 is projected at 3.15mmt, the same as USDA, however FAS estimates barley exports at 1.2mmt, 600,000 tons lower than USDA.

Corn production is 36.5mmt, although the harvested area is reduced by 50,000 hectares due to severe rain storms in mid-December and mid-January, corn not directly affected by floods is considered to be in great condition.

Drop me a line if you are in Brazil or Argentina and would like to assist me setting up an independent Crop Tour service blackseacroptour@gmail.com

Wednesday, 8 February 2017

Ukraine’s state owned grain corporation avoids privatisation

The Cabinet of Ministers of Ukraine have adopted a resolution to exclude the public joint stock company State Food and Grain Corporation of Ukraine from the list of state property to be privatised in 2017.

The PJSC, known as DPZKU or ДПЗКУ was established in 2010 and, according to their website, is the most powerful state vertically integrated company in the agricultural sector and is the leader in storing, processing, shipping and exporting of grains.

It owns 10% of the certified storage capacities and its port terminals handle up to 6% of the annual volumes of grain exports while the processing enterprises of the Corporation can provide up to 10% of domestic market demand of Ukraine in flour, cereals and animal feed.

The Minister of Agriculture said that it "will improve the efficiency of the company and continue effective cooperation with Chinese partners”, because, as we all know, state owned organisations are renowned for their supper efficiency.

In 2012 Corporation raised a government-secured loan of USD 1.5bn from the Export-Import Bank of China for a 15 year grain export project under trade agreements with China which probably has more to do with the Corporation dodging privatisation than anything to do with efficiency.

A small but significant victory for Ukraine’s organic farmers

The development of Ukraine’s organic sector took a positive step forward yesterday when the Committee on Agrarian Policy recommend the Verkhovna Rada (Parliament) support the draft bill on organic farming at the first reading.

It’s not clear, to me at least, if this means adopting the draft bill is now a formality or it could still be held up or rejected by the Verkhovna Rada, though for what purpose would be a mystery.

After the meeting the Deputy Minister of Agriculture, Olga Trofimtseva, said “so far, a small victory, but in case the Parliament [it] will be a big step for the development of the Ukrainian organic sector".

These developments, small as they may be, are significant in the development and future of the country but often get overlooked against the background of negative news about Ukraine.

Well done to all concerned, time to open a bottle of sparkling organic elder flower wine.

The development of the organic market is a priority for the Government and the agricultural sector development strategy known as "3 + 5".  The primary step is to improve the regulatory framework of organic production, handling and labelling to bring it in line with EU legislation.

Russia’s latest dairy update

Russia’s Minister of Agriculture, Alexander Tkachev, speaking at the VIII Congress of the National Milk Producers Union, said that despite difficulties the dairy industry has shown a positive trend in the last year.

Throughout the country, milk production remained at the 2015 level and amounted to 30.8mmt.

According to the Minister, a dairy farm yielding 5,000kg per cow should see a profit, with state support, up to 18%.

I recall my old university farm finance lecturer telling me not to use the term “profit” as it’s meaningless unless quantified; is that before or after tax, private drawings, loan repayment, re-investment etc.

The Minister went on to say that within five years Russia can reduce milk imports by 5-10% through state support for dairy farming which almost doubled in 2016 to about 26 billion roubles.

To encourage further investment in the industry, Russia has changed CapEx subsidy rules, increasing the amount of time over which the dairy can be built and increasing compensation up to 35% of the build cost.

Long term development includes attracting investment in to dairy farming (show me a business plan that doesn’t), build 800 new dairy farms by 2020 and to reach self-sufficiency in milk by increasing the average yield to 6,000kg per cow.

Couple of issues with that plan; cost of production per kilogram of milk is the measure of business profitability not yield per cow plus 800 new dairy farms will cost a truly enormous amount of money (my calculator couldn’t compute it when I tried to estimate it).

Apart from China, I don’t see anybody with that kind of risk benefit investment fund.

Latest USDA weather update for western FSU

Winter wheat was protected from bitter cold by a moderate to deep snowpack over most of the region.

Minimum temperatures averaged -20 to -30°C across central portions of Ukraine and Russia, but had no detrimental impact on dormant winter wheat due to moderate to deep snow cover (10-60 cm).

In southwestern Russia, the coldest readings (as low as -19°C) occurred when there was still 3 to 6 cm of snow on the ground, protecting wheat from widespread freeze damage or winterkill.

However, warmer weather melted much of the snow in southern portions of Russia’s Southern District (Krasnodar Krai) by week’s end, leaving crops exposed to any incursions of late-season cold.

Latest USDA weather update for Europe

A shift in the weather pattern resulted in a pronounced warm up over much of Europe, with rain overspreading western portions of the region.

The persistent ridge of high pressure responsible for the recent spell of dry, cold weather weakened and shifted east, allowing an influx of warm, moist air from the Atlantic Ocean to overspread the continent.

Temperatures averaged 2 to 6°C above normal, though chilly conditions (1-3°C below normal) lingered from Poland into northern Hungary as well as the lower Danube River Valley.

The pronounced warmth melted most of Europe’s snowpack, with a shallow to moderate snow cover (2-15 cm) confined to northeastern growing areas at week’s end.

The arrival of moist Atlantic air triggered widespread moderate to heavy showers (10-50 mm, locally more) in England and France, easing short term dryness and improving soil moisture reserves for dormant winter crops.

Farther south, 25 to 200 mm of rain across northern portions of the Iberian Peninsula eliminated short-term drought and boosted prospects for vegetative winter wheat and barley in northern Spain (Castilla y León).

Rain and mountain snow in northern Italy ended a two-month long dry spell and improved irrigation reserves for warm-season crops.

Showers were lighter (1-20 mm) from Germany into the western Balkans, but nevertheless still welcomed for dormant winter crops following a drier-than-normal start to 2017.

Tuesday, 7 February 2017

Black Sea temperatures low for second successive night

It was pretty cold over much of the Black Sea wheat growing area last night and it looks like it’s going to be another cold one tonight.

In Ukraine, Kyiv, Cherkassy, Dnipro, Poltava are looking at -14C to -21C (7F to -6F) with more of the same predicted for Wednesday and Thursday, while in Russia temperatures in Kursk, Voronezh, Lipetsk, Tambov, Penza and Saratov will fall to a low of -26C (-15F).

Rostov is looking at -17C (1F) tonight and Stavropol -11C (12F) with reports of limited snow cover and ice rain earlier in the day increasing the risk of crop damage in these regions.

Krasnodar is forecast a balmy -6C (21F) by comparison although expected to drop much lower as we move through the week.

Mykolaiv and Kherson in Ukraine remain at risk despite some snow fall today as it could see -15C (5F) by Thursday so snow depth will be critical here.

At the moment Odessa looks to be at low risk with temperatures hovering around freezing until Thursday when it will drop to -11C (12F).

The first Black Sea Crop Tour of 2017 will take place in March to assess the post winter condition of the wheat crop, subscription details will be posted soon.

Ukraine's Ministry of Agriculture submit 11 bills to Parliament

Yesterday, Ukraine’s Ministry of Agriculture submitted 11 bills to the Verkhovna Rada (Parliament) to be passed into law.

I’ll be the first admit I struggle to fathom how Ukraine’s Parliament functions but if I understand correctly, if the Verkhovna Rada vote these bills through then they go on to be law.

Of the 11 bills submitted, seven have already been considered by committees of Parliament and recommended for adoption which sounds like a shoo-in.

Leaving aside the process, I think the bills give a useful insight into the direction Ukraine’s agriculture and food business is going in.

The first bill is the de-monopolisation of the alcohol industry, specifically it seems the privatisation of the state owned alcohol producer, Ukrspirt, who produce vodka and industrial alcohol which I can imagine is a lucrative business in Ukraine. 

The official line is there is a need to promote the legalisation of the alcohol market to attract investment but it will be worth watching to see who gets to benefit from its privatisation.

Other bills include organic farming; baby nutrition; food safety; land issues; regulation of sugar production and sales; insurance of agricultural production; European integration; export duties on live cattle and rawhide and something to do with documents for grain storage.

Russia to provide farmers with quality seeds

Russia continues to make announcements about supporting farming, this time with the First Deputy Minister of Agriculture emphasizing the need to develop seed breeding.

At a recent meeting of scientists and seed breeders the Minister said they must ensure that farmers are supplied with quality Russian seeds and it is necessary to change the proportion of seed on the market to compete with foreign selection.

The market share of imported seeds is 20% to 80% depending on the crop, currently 70% of sugar beet seed is imported, 28% corn, 44% sunflower, 23% vegetables and up to 80% of potatoes.

The Minister said that national seed breeders needed to master modern technologies to ensure control over the production and circulation of seeds.

It’s probably a fair point but it wasn’t reported how any this would be funded and seed breeding it can be an expensive and lengthy process.

If you’re one of the foreign seed companies currently importing into the lucrative Russian market I wouldn’t worry too much just yet but, as I say often in these blogs, it does illustrate the intent of Russia’s agricultural policy so best be prepared.

Monday, 6 February 2017

Cold elevates Black Sea crop risk

Temperatures are dropping in Russia and Ukraine this evening with a few cold nights forecast through the rest of this week.

Central Ukraine is predicted to go as low as -11C (12F) tonight with -20C (-4F) tomorrow and for the next few nights.

It’s a similar story over in central Russia around Kursk, Voronezh and Lipetsk where it is all registering -24C (-11F) tonight with a possible -26C (-15F) for tomorrow.

Most of these regions have sufficient snow cover at the moment and our November crop assessments showed crops to be in good condition going into the winter, but there are a few potential sites where snow has melted leaving crops exposed and at risk of cold damage.

In Ukraine the last clear satellite images showed Odessa, Mykolaiv and Kherson to be at risk although temperatures are only predicted to go as low as -6C (21F) tonight but could be as low as -14C to -16C (7F to 3F) as we move through the week.

In Russia snow seems thin on the ground around Rostov and further south in Krasnodar, both important winter wheat growing regions.

Rostov is looking at -10C (14F) tonight with lows of -18C (0F) in the week while Krasnodar could see -11C (12F) by Thursday.

Under current conditions I don’t see these temperatures having a major impact in terms of winterkill which typically ranges around 5-10%, but that assumes temperatures don’t go much lower and start to lift before the week is out, however it will be reducing crop vigour.

The effect will translate in to a lower yield potential but we won’t be able to fully assess the implications until we run the first Crop Tour of the season.

The first Black Sea Crop Tour of 2017 will take place in March to assess the post winter condition of the wheat crop, subscription details will be posted soon.

Brazil will start to buy Russian wheat

Last Friday the Russian Ministry of Agriculture and the Brazilian Ministry of Agriculture held a
meeting to discuss the state and prospects of development of cooperation in the agricultural sector.

According to the Russian Ministry, Brazil expressed an interest in importing Russian wheat once all the phytosanitary issues can be resolved.

Consequently Russia proposed to intensify the work of the Russian-Brazilian Agrokomiteta, presumably to facilitate trade by resolving any phytosanitary issues.

So although the Russian Ministry announced that Brazil will start to buy Russian wheat it includes the caveat that once all necessary regulations and phytosanitary issues have been resolved to the satisfaction of all parties.

Anybodies guess as to how long that might take.

Friday, 3 February 2017

Russia ban New Zealand beef

Russia’s veterinary surveillance watchdog posted notification yesterday that they plan to introduce a ban on New Zealand beef and beef products starting from Monday next week.

The watchdog say that results of laboratory tests conducted in 2016 revealed numerous violations of standards in meat and meat products from New Zealand.

Between May and December they identified and recorded bacteria of the genus Listeria in beef and beef offal and found ractopamine in the liver of beef.

Ractopamine is a feed additive used to promote leanness in animals raised for meat and has been banned in many countries including Russia and the European Union.

New Zealand authorities reacted by saying that New Zealand food standards are among the highest in the world and they are committed to producing high quality safe meat for domestic and overseas consumers.

A spokesman for New Zealand's Ministry for Primary Industries said ractopamine is not registered for use in beef animals which given the gravitas of the situation is not quite the same as saying it’s banned outright.

New Zealand's Chief executive of the Meat Industry Association said the additive was prohibited in beef or sheep feed in New Zealand, but was allowed in pork, so it is available in country and it’s not beyond the realms of possibility that it could find itself entering the beef food chain, accidentally or otherwise.

Furthermore while ractopamine is prohibited for use in many countries around the world, it’s not prohibited in every country including, as far as I can tell, the USA.

Given how the global food supply chain is open to anomalies, it’s not entirely unfeasible that New Zealand beef products exported to Russia might also include beef products sourced from a country that has not banned ractopamine.

It wouldn’t be the first time something like this has happened, remember the UK horse meat scandal, I seem to recall a UK industry spokesman at the time saying their food standards are among the highest in the world and they are committed to producing high quality safe meat etc.

New Zealand authorities are saying they are "mystified" by the report and describing the move as "sabre rattling" and probably a non-tariff barrier to frustrate trade which may well be the case but in my experience Russia generally doesn't make these type of announcements without some sort of evidence.

New Zealand's meat industry representatives need to get un-mystified pronto and sort this out given the red meat trade to Russia was worth NZD 24.6m in 2016 with beef livers accounting for NZD 9.5m. 

New Zealand is not covered by Russia's wider ban on Western food imports.

Thursday, 2 February 2017

Russia takes action on locust for 2017

Russia's Ministry of Agriculture held a workshop this week on locust and have instructed regions to take preventive measures to control the pest in 2017.

During the workshop they noted that in recent years there has been a strong growth in the number of locust incidences that have caused problems for crops.

Just google Russia locust and you’ll soon get the idea why the Ministry of Agriculture is concerned, a swarm can strip a standing crop in minutes.

It’s been a long time since I did some post grad studies on locusts but from what I remember once their food source starts to diminish and they come in close contact with each other, serotonin is released causing them to change from the humble grasshopper and into a swarming hoard of voracious locusts.

The last couple of summers in the north Caucuses has been hot and dry leading to a depletion in the grasshoppers food resulting in locust swarms that moved further north and west into important cropping regions of southern Russia.

The Ministry of Agriculture technical centre has provided the regional branches with an action plan of control measures to combat locust pests which I guess involves aviation fuel, stockpiles of organophosphorus and crossed fingers.

While swarms in the past have been devastating (see pic from southern Russia) they have been relatively localised covering tens of thousands of hectares, the fear being that if they swarm early enough and cover hundreds of thousands of hectares then they could really do some damage to Russia’s grain output.

For 2017 the Ministry has planned to allocate funds that, in the event of a swarm, will provide control over 800,000 hectares. 

That’s planned mind, not allocated yet.

Wednesday, 1 February 2017

Ukrainian 2016 agricultural exports worth USD15billion

Ukraine exported USD 15.5 billion worth of agricultural and food products last year which accounted for 42.5% of all exports.

According to Ukraine’s Deputy Minister of Agriculture, Olga Trofimtsevoyi, Ukrainian exports of agricultural products increased by 4.5% compared to 2015 year.

The Deputy Minister said "we see considerable potential for increasing exports of agricultural and food products, provide diversification of the commodity structure and increasing the share of processed food products with higher added value in total exports."

She went on to note that the main export products in 2016 were still traditional products like cereals, oils and oilseeds but also included soya, sugar and meat.

The largest recipient of Ukrainian agricultural produce was Asia taking nearly 46% of all exports followed by the EU with 28%, African countries with 16% and the CIS with 7.7%.

The US took less than 1% which is unlikely to increase if Trump succeeds in pushing through his protectionist policies.

McDonald’s to open more restaurants in Russia

McDonald’s plan to open more than 50 restaurants in Russia this year according to the local chief executive after opening 73 last year.

The head of McDonald's Russia told a news conference that the target for 2017 did not signify the company was slowing the pace of expansion although I think it's safe to assume that currency volatility and a recession in Russia must have had an impact.

The head of McDonald's said the company aimed to bring the share of local suppliers to almost 100% by the end of 2018 from the current 85% and was encouraging suppliers to develop production in Russia.

In my experience Russian consumers treat McDonald's as a bit of a novelty, going there once or twice for the experience but preferring the multitude of Russian outlets that serve more traditional, less processed and, to be honest, better food.

McDonald's opened its first restaurant in Russia in 1990 and has about 600 restaurants compared to 14,200 in the US, 1,400 in Canada, 1,400 in France, 1,200 in the UK and 920 in Australia.

Russian pig production up 9.4%

Russia’s Ministry of Agriculture are reporting that 2016 production of pigs for slaughter in live weight for all categories amounted to 4.35mmt, up 9.4% on 2015.

It looks like commercial pig producers, as opposed to backyard and small scale private farmers, have been investing in production with 3.5mmt coming from agricultural organisations, which is 12.9% more than in 2015.

This would be in line with the government and agricultural import substitution policy in response to self-imposed sanctions on food imports.

I guess some of those pig producers who have invested in their business might now be looking less favourably at the Trump Putin relationship which many are starting to believe will remove sanctions in the near future.

The average price of pigs in live weight in Russia in December amounted to 95.32 roubles per kg (USD1.58/GBP1.26/EUR1.47).

Tuesday, 31 January 2017

Latest USDA weather update for western FSU

Dormant winter wheat remained insulated by a moderate to deep snowpack over most of the region.

Winter crop areas from central and northern Ukraine into central Russia remained covered by 10 to 60 cm of snow.

Southern portions of Russia’s Southern District (Krasnodar Krai), which had been devoid of snow cover, benefited from 2 to 5 cm of snowfall during the period.

Nevertheless, minimum temperatures (-16 to -11°C) posed no threat to dormant winter wheat in areas where the snow was shallow and patchy.

(Not sure why USDA weather update are not picking up on the lack of snow in southern Ukraine, see post below)

Latest USDA weather update for Europe

High pressure maintained dry albeit cold weather over much of the continent, though the weather pattern began to change by week’s end.

Winter crop areas of central and northern Europe were dry and cold (2-5°C below normal, up to 7°C below normal from southern Germany to the western Balkans), with a shallow to moderate snowpack (2-20 cm) prevalent from Germany into Poland and the Balkans.

Winter grains and oilseeds were dormant and mostly in good condition, with no damaging freezes reported in snowfree areas during the period.

By week’s end, showers (5-40 mm) arrived from the Iberian Peninsula into western England, improving soil moisture for dormant (north) to vegetative winter crops.

The rain was especially welcomed in northwestern Spain (Castilla y León), where a protracted spell of dry weather reduced moisture supplies for vegetative wheat and barley.

The rain’s arrival also signaled a pattern shift, as the recent dominant area of cold high pressure was replaced by Atlantic storms.

Russian and Ukraine wheat at risk from cold

Moscow based Institute for Agricultural Market Studies (IKAR) are reporting that a cold spell expected between January 27 and February 4 pose a risk to winter wheat in parts of Russia's southern regions of Rostov and Krasnodar.

Temperatures are expected to fall in Rostov and Krasnodar regions to -17C (1.4F) where the area is not currently protected by snow, according to the head of IKAR, Dmitry Rylko.

IKAR estimate upwards of 0.5mha in Rostov and 0.4 hectares in the Krasnodar are at risk.

Russian farmers planted 17.4mha of winter grains for the 2017 crop, up from 16.3mha the year before and both Krasnodar and Rostov are important wheat producing areas.

The latest satellite images seem to show some snow free areas although my contacts in the region are telling me there is generally sufficient snow about at the moment so I'm not sure how big an issue this might actually be.

Across the border in Ukraine, however, and the satellite images clearly show a snow free area across the southern regions of Odessa, Mykolaiv, Kherson and Crimea which on the face of it looks like a much bigger problem than in Russia.

I think we need to keep a close eye on the thermometer over the coming days and weeks.

Russia unlikely to repeat a record grain harvest in 2017

The President of the Russian Grain Union, Arkady Zlochevsky, has said that the 2017 general grain harvest in Russia will be high but will not reach the record level of the previous year.

His premise being that the condition of winter crops after the end of winter is a determining factor and in 2015-16 almost 100% survived while traditionally farmers lose 10-15% so it is hardly possible to rely on the same results this year.

I would agree with Mr Zlochevsky’s observation and add to it how rain during the rest of the season allowed that record amount of crop that survived the winter to go on and yield so well at harvest.

A perfect storm of weather conditions which is unlikely to be repeated this year.

Crops were in very good condition going into the winter (see our crop condition report) and despite some recent reservations about Krasnodar, right now they are all pretty much tucked up safely under an insulating blanket of snow.

Assuming nothing untoward happens between now and the end of winter (although there is still a lot of winter to get through so it could) then there should be a good foundation of winter cereals at the start of the season.

However I just don’t see that the rest of the season will be as conducive to crop growth as it was last year.

One look at the precipitation charts shows how unusual last year was and we are overdue a dry year, 2017 could be it.

We’ll be kicking off the first crop tour of the season in March to take an independent assessment of crop condition post winter with thoughts on yield potential, subscription details will be made available in the next few weeks.

US ready to negotiate on Ukraine organic wheat

The United States is ready to negotiate the supply of organic wheat from Ukraine according to Ukraine’s Minister of Agrarian Policy and Food.

During a TV interview the Minister said that US food is highly regulated and it is difficult to enter the market with new products but the US are ready to negotiate on organic wheat.

The Minister said that it takes time to convert land to organic which is not a problem in Ukraine as land is not so contaminated.

I might be getting the nuance of his translation wrong here but if that is what he said then I’m not entirely sure he understand how conversion to organic or organic standards work.

In line with previous announcements the Minister went on to stress that the although Ukraine currently produce and export a small amount of organic products compared to the organic world market, the future for Ukraine organic market is very large.

I couldn’t agree more but let’s hope the Minister understands how the organic market works or someone appraises him very soon otherwise when he finds out you can use sprays and fertiliser on organic farms he’s going to have a fit.

According to Ukraine’s Agricultural Ministry, Ukraine currently cultivates about 400,000 hectares of organic land and 80% of organic products are exported.

Monday, 30 January 2017

Russia consider restricting imported pesticides

Russia is considering applying control measures on importation of plant protection products (pesticides) into the customs territory of the Eurasian Economic Union (EEU).

In a meeting last week at Russia’s analytical centre, it was noted that between January and October last year, imports of pesticide products increased by nearly 21% compared to 2015 and continues to grow.

Import customs duty rates for pesticides are currently set at the highest level allowed under World Trade Organisation rules.

Representatives from the analytical centre said there is a need to develop a document that will reflect the requirement to restrict pesticide imports in to the country.

They go on to say the document should help to protect the interests of domestic producers of plant protection products, while preventing the import of counterfeit products which seems to be confusing two issues – protectionism and counterfeit products.

I’m not entirely sure if they are just brainstorming in line with the current policy on import substitution being extended to technology or how a document may be translated in to direct action but the idea seems clear enough and the implications could be wide reaching.

As a minimum I think we can expect to see a tightening of the regulations and procedure (and cost) that imported pesticides will have to go through before being registered for use in the EEU.

Ukraine improves its corruption ranking

Transparency International has released its annual Corruption Perceptions Index in which Ukraine scored 29 out of a possible 100 points, which is good news and not so good news.

The good news is that it is an improvement of two points compared to last year which shows the anti-corruption reforms that Ukraine has implemented is having some impact.

Transparency International noted positive changes in reduced abuse in government office, the police, and the armed forces and greater accountability of public procurement.

The not so good news in that Ukraine is ranked 131 out of 176 countries in the world corruption rankings with Transparency International saying the justice system remained at the same level of corruption as in the Yanukovych era.

They cited the absence of asset recovery from the Yanukovych regime and his allies as vivid evidence for that.

The problem is that Ukraine needs to improve its corruption rating to allow inward investment.

At the moment the massive amount of finance that Ukraine desperately needs is locked just out of reach by cooperate governance and due diligence.

An institutional investor carries out his due diligence and the risk from corruption is deemed as too great which stops the investment happening.

Improving Ukraine’s corruption perception rating is crucial in allowing inward foreign investment at the levels that the country needs and when it does we should start to see some big things happen particularly in the agri sector.