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Ministry of Agriculture downgrades grain harvest forecast

The Ministry of Agriculture has announced its new grain harvest forecast of 80-85mmt vs. its previous forecast of 85mmt (94mmt as of June, 2012). Grain exports have also been downgraded from 18-20mmt to 16-18mmt.

Even the lower bound of the range of 80mmt more than covers domestic needs, which are estimated at around 72mmt. A repeat of the poor harvest of 2010 is not a base-case scenario yet. Nevertheless, the development is negative for non-integrated meat producers, such as Cherkizovo, for whom grain is one of the main cost items as a fodder component. Average grain prices are already up 40% YoY and 35% YTD with supply constraints putting further upward pressure on them. 

Ivan Kushch, Maria Kolbina, Nikolay Kovalev
VTB Capital analyst


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