RUSSIA AGRI-BUSINESS REPORT

With Russia's entry to the WTO, subsidies to the agricultural sector will be phased out, which could hit some livestock producers. However, the government will continue to play an active role in the agriculture industry. For livestock, we continue to see strong growth in the poultry sector owing to continuous government support and import restrictions.

The privatisation of state-owned grain trader United Grain Company (UGC), which is expected to boost efficiency in Russia's grain sector, should not end the government's interventions in the industry. In spite of extreme weather in Russia's growing regions we believe it is unlikely that the country will implement grains export restrictions this season.

Key Developments: Corn production growth to 2015/16: 143.1% to 7.5mn tonnes. Much of this growth is due to the very low base. However, expected growth in the country's poultry and pork sectors, which use corn as feed, will also have an effect.

Cheese consumption growth to 2015/16: 27.0% to 936,990tonnes. Stronger incomes will lead to increased consumption despite the country's falling population. Growth in cheese and butter demand will be stronger than milk demand growth as more milk is used to produce value-added dairy products.

Poultry production growth to 2015/16: 74.7% to 4.4mn tonnes. Growth will be supported by strong domestic demand and government initiatives to ensure a domestic production surplus. We project Russian poultry production to surpass consumption from 2014 onwards.

2012 real GDP growth: 3.4% (down from 4.3% in 2011; predicted to average 4.0% over 2011-2016).

Consumer price inflation: 4.9% year-on-year (y-o-y) on average in 2012 (down from 8.5% yo-y on average in 2011).

BMI universe agribusiness market value: 13.6% y-o-y increase to US$44.0bn in 2011/12, forecast to grow on average 4.2% annually between 2010/11 and 2015/16.

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