Boerenbusiness analysis
Grain the new oil for Russian sheiks
The highly profitable fields are located in Russia. Both in yield and in rubles. The country is investing heavily in agriculture and is working hard to gain market share on the world market. Russian oil sheiks therefore regard the grain parcels as interesting investment objects.
The livestock sector in Russia is also flourishing, as are the greenhouse horticulture sector and the cultivation of sugar beet. Boerenbusiness lists the developments of Russian agriculture.
Fourth producer in the world
In a relatively short time, Russia has become the fourth largest producer of wheat in the world. The Russians have surpassed the United States with this. Only the European Union, China and India record even higher production figures. Wheat production in Russia has nearly doubled since 2012 to about 72 million tons in 2016. It is estimated that Russia produces about 8 percent of the world's wheat production.
With more than 2016 million tons, Russia became the largest exporter of wheat in 30. In 2012, the export counter still recorded 11 million tons. Russian agriculture is said to be flourishing mainly because of the trade boycott that the EU and US have launched against the country since 2014.
Double digit growth
According to various measurements, Russia, with 120 million hectares, owns just under a tenth of the world's arable land. Not only the production of grain is on the rise, but the production of pork, poultry meat, dairy and greenhouse crops are also achieving impressive growth figures. In addition to exports, room for growth is also found on the domestic market.
The self-sufficiency of agriculture in Russia is 95 percent. This means that there is still a significant trade deficit for many products. In addition, the Kremlin invests generously in its own agriculture through numerous subsidies.
0,56
dollar
Low land price, cheap oil and weak ruble
In addition to the large government support and a demanding internal market, there are also other interesting growth factors. An example of this is the oil price. On average, a liter of diesel in Russia costs about 56 cents at the pump. That is quite different from European oil prices, which are driven up by excise duties and taxes. The low oil price certainly benefits the cost price of Russian agriculture. Feed raw materials, such as wheat, are also considerably cheaper in Russia. Land prices in Russia are also significantly below levels elsewhere in the world.
The weak ruble also plays a role. The Russian central bank decided on November 10, 2014 to let go of the ruble exchange rate. The ruble depreciated by about 30 percent against the dollar. The ruble is quite weak due to the unrest in Crimea and low oil prices.
The weak ruble is a necessity for importers, but a virtue for exporters. The strong growth experienced by Russian exports is partly due to the weak Russian currency. Russian agriculture is now the second largest exporter, after gas and oil. Agricultural exports have pushed the arms industry into third place.
Favorable geographic location
In terms of exports, Russia also has an interesting geographical location. The fertile fields in central and southern Russia are located near the Black Sea. There are many export terminals that connect Russia with major grain importers in North Africa and the Middle East. Egypt and Algeria are respectively the largest and third largest importers of wheat in the world. Morocco and Turkey are also in the top 10. Russia has excellent access to these countries. Much better than the competition in North America, for example.
Also in the east of Russia, in the border regions with China, the soil is excellent for agriculture, for example for the production of soy. Russia has the potential to serve China excellently. However, exports to China are still in their infancy and could take years to pick up seriously.
oil sheiks
Oil sheiks also see the potential and therefore pump a lot of money into agriculture. Grain, fruit and livestock are interesting alternatives now oil production is restricted by the OPEC countries. Especially because oil revenues are also disappointing. Jokingly, there is already talk of grain sheiks.
Look at the world market
Russia has many large agro-concerns such as Cherkizovo, Phosagro's and Acron. These companies have grown strongly in recent years. It is expected that these companies will further increase production and modernize it further. This means that Russia is becoming less dependent on imports. Production is also being adapted to world market standards. That should further boost exports.
While European farmers are limited by many rules and have to deal with a stimulative government policy, Russian agriculture has free rein. In short: Russia was already an agricultural giant, but it is likely to become much bigger.
Wouter Job
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