Boston, MA -- (ReleaseWire) -- 12/13/2012 -- BMI View: The recently adopted agriculture development programme demonstrates the Russian government's increased commitment to support the industry in spite of the recent accession to the WTO. New measures ensure that most agricultural support complies with the WTO rules, such as the transformation of price support into income support. Russia's grain output has been severely affected by droughts during plantings, and the livestock and dairy industries are experiencing tighter margins as a result. That said, we continue to see strong growth potential for production in both sectors as the livestock industry benefits from protective measures and the dairy industry attracts foreign investment.
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- Wheat production growth to 2016/17: 18.1% to 65.1mn tonnes. Yield gains and better access to export markets in Asia are expected to result in increased wheat production.
- Milk consumption growth to 2016/17: 0.3% to 12.0mn 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.
- Pork production growth to 2016/17: 20.5% to 2.4mn tonnes. Increasing efficiency in farming methods as investment is drawn to the sector by the potential rewards on offer will lead to gains in production. Government measures curbing imports will also play a part.
- 2013 real GDP growth: 3.6% (up from 3.4% in 2012; predicted to average 3.9% over 2012- 2017).
- Consumer price inflation: 6.6% year-on-year (y-o-y) on average in 2013 (up from 4.9% y-o-y on average in 2012).
- BMI universe agribusiness market value: -7.2% y-o-y increase to US$40.8bn in 2012/13, forecast to grow on average 2.7% annually between 2011/12 and 2016/17.
We revised down our 2012/13 forecast for Russia wheat production as dry and hot weather have continued to damage crops in key growing regions such as the Volga Valley, the Urals and Siberia. We now expect output to drop 23.8% y-o-y to 42.0mn tonnes in 2012/13, compared with a previous expectation for output of 50.0mn tonnes. The drought is expected to slash wheat yields by almost 40% yo- y, to 1.87 tonnes/hectare (ha), according to the US Department of Agriculture, while area harvested is also estimated to decline relative to 2011/12. The steep drop in production will leave the Russian production surplus at a relatively low level of 4.4mn tonnes, compared with the 10-year average of 11.0mn tonnes.
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