Boston, MA -- (ReleaseWire) -- 02/19/2014 -- We are very positive about growth potential in the Russian agricultural sector and see tremendous opportunities in the grains and dairy segments in particular. We view the livestock sector positively as well, even though the dominance of the market by domestic players and the high barriers to entry could limit investment and productivity gains in the medium term. WTO entry has not triggered major changes in government support to the sector, but we expect a small reduction in the overall budget allocated to the sector.
- Wheat production growth to 2017/18: 67.9% to 63.5mn tonnes. Yield gains and better access to export markets in Asia are expected to result in increased wheat production.
- Milk consumption growth to 2018: 0.3% to 11.2mn tonnes. This slight increase in consumption will most likely be aided by increased interest in coffee, as milk is a complementary good. Consumption of premium coffee as a niche but growing segment is demonstrated by the rapid growth of domestic coffee house chains.
- Poultry production growth to 2017/18: 70.2% to 5.1mn tonnes. This will come on the back of strong domestic demand and government initiatives to ensure a domestic production surplus. Specifically, the government is implementing programmes to improve the country's slaughter and processing capabilities.
- 2014 real GDP growth: 2.1% (up from 1.4% in 2013; predicted to average 2.6% over 2013-2018).
- Consumer price inflation: 5.8% year-on-year (y-o-y) on average in 2014 (down from 6.8% y-o-y on average in 2013).
- BMI universe agribusiness market value: 8.2% y-o-y to US$111.1bn in 2013/14, forecast to grow on average 4.5% annually between 2012/13 and 2017/18.
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Key Revisions To Forecasts:
- Wheat: 2013/14 production revised up to 54.4mn tonnes (from 53.0mn tonnes previously) in line with the most recent estimates.
- Corn: 2013/14 production revised up to 11.4mn tonnes (from 9.0mn tonnes previously) on latest official estimates
- Barley: 2013/14 production revised down to 15.0mn tonnes (from 17.0mn tonnes previously) as we believe the crop will see less plantings than for corn and wheat.
The progress of the 2014/15 sowings over the coming months will be crucial in estimating the timing of global price moderations over 2014. While there have been concerns about flooding in Russia delaying sowings for 2014/15, the outlook for the coming harvest is better than previously expected. We maintain our forecast for the Russian wheat harvest to increase again to 56.2mn tonnes in 2014/15. This will take the country's wheat production back up to its 2011/12 level but still below 2008/09-2009/10 levels. In line with this, we keep our bias for CBOT prices to break below the USc600/bushel level in H114. We forecast CBOT wheat prices to average USc610/bushel in 2013/14.
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