Focus on exports

Focus RUSSIA

on exports

Russia is aiming to become one of the world’s largest exporters of oils and fats in the next few years by signifi cantly increasing domesti c output and by providing additi onal support for exporters, according to some Russian senior offi cials and local analysts in the agriculture sector.

In recent years, Russia has strengthened its positi on in the global oils and fats market primarily by increasing exports.

According to data from the Russian Ministry of Agriculture, Russian exports of oils and fats grew by about 20% in 2019 compared with the previous year and were worth around US$3.9bn. In terms of volume, exports increased to 3M tonnes, which was a record in the history of modern Russia.

Commenti ng on these fi gures, Russia’s Deputy Minister of Agriculture Oksana Lut said the 20% growth had been the highest for the Russian oils and fats industry since 2014-2015 and the highest among the non-energy sectors of the Russian economy.

As a result, Russia’s share of the global vegetable oils market reached about 14% in the case of soyabean and rapeseed oils, and around 26% for sunfl ower oil.

However, despite these increases, the government sti ll plans further increases in the domesti c producti on and exports of both oils and fats. As part of these plans, by 2024, total exports of domesti c vegetable oils are expected to reach US$8.6bn, which would be almost 2.7 ti mes higher than in 2017.

According to an offi cial spokesperson from the Russian Ministry of Agriculture, in contrast to previous years, the export

Russia is aiming to become a leading oils and fats exporter by increasing domestic output and providing additional support for exporters Eugene Gerden

of fi nished products would be given a specifi c focus. At the same ti me, exports of some major oil-bearing crops would decrease to meet the needs of domesti c processors.

In fact, there has already been a recent decline in exports of oilseeds from Russia. Last year, these exports totalled 726,000 tonnes, compared with 1.2M tonnes in 2018. By 2024, it is forecast not to exceed 447,000 tonnes.

Lack of raw materials

The implementati on of these plans, however, could be hampered by serious problems within the industry, notably the shortage of raw materials, according to local analysts. This shortage persists despite the fact that the harvest of oil-bearing crops in Russia this year is expected to exceed a record 17M tonnes.

Even such record harvests would be insuffi cient to meet the demands of domesti c oil processors, who currently require a total of around 23-25M tonnes/ year, local analysts say. This fi gure is expected to increase to 33M tonnes/year by 2024.

The lack of raw materials limits the margins of the industry and reduces its export potenti al. Processors have spoken about the need to expand the planted area of major oil-bearing crops in Russia.

Commenti ng on the situati on, Daria Snitko, head of Gazprombank’s Center for Economic Forecasti ng and one of Russia’s leading analysts in the fi eld of agriculture, said in an interview with the Russian Rossyiskaya Gazeta business newspaper that there was also a need for Russia and its farmers to make bett er use of its global experience in the use of arable land.

According to Snitko, only 69% of the existi ng arable land area in Russia is currently used by local farmers, signifi cantly lower than in the majority of developed nati ons, where the fi gure is in the range of 75-80%.

In the meanti me, aware of the problem, the Russian Ministry of Agriculture is planning to introduce up to 10M ha of arable land into the domesti c farming business over the next fi ve years. According to state plans, this would fulfi l the demands of domesti c oilseed processors and also sti mulate the producti on of vegetable oils and fats.

The only problem, however, could be related to existi ng duti es on the export of oilseeds from Russia, which are currently set at a rate of 6.5%, a fi gure the industry considers as extremely low.

According to analysts, such a low rate forces farmers to export their crops rather than supply domesti c processors.

Sunfl owerseeds are the excepti on, with exports growing fi ve-fold for the last three