Browning Newsletter: Climate, Behavior and Commodities
Comment of the Day

August 12 2010

Commentary by David Fuller

Browning Newsletter: Climate, Behavior and Commodities

My thanks to Alex Seagle of Fraser Management Associates for their fascinating publication produced by Evelyn Browning Garriss. Here is part of a section on Russia
Russian Agriculture - A Story of Freezes and Droughts

Russia is Europe's biggest wheat producer. It has become the world's third largest wheat exporter, behind only the US and Canada. Its recent policy of privatizing collective farms has successfully attracted huge investments in agricultural machinery, silos and grain-carrying railroad cars.

The result has been bumper crops - 108 million tons in 2008 and 97 million tons of grain in 2009. Since domestic consumption is typically 77 million tons, Russia's export trade has soared. Both years saw lines over a dozen miles long of trains and trucks delivering surplus grain to the Black Sea's busy ports. The abundance of food led to reduced inflation. It has been an incredible achievement.

To understand how remarkable this achievement has been, one has to understand how difficult Russian agriculture is. Russia has two major climatic factors that historically have limited its crops:

1. The length and severity of Russian winters limits the growing season in the northern (forest) part of the country and

2. The southern steppes have frequent droughts.

A study by Genady Golubev and Nikolai Dronin, Geography of Droughts and Food Problems in Russia (1900-2000), published in 2004 compared the problems of Russian agriculture to the US.

80% Russia is in the least productive thermal zone for agriculture compared to 19% for the US,

Only 4% of Russia is in the most favorable thermal zone compared to 31% of US territories,

Overall, Russia with its mostly continental climate is drier. Its average annual precipitation is 490 mm (19.3 inches) while the average precipitation for the US is 782 mm (30.8 inches).

Only 1.4% of Russia's land has the optimum combination of temperature and moisture for agriculture. 56% of US land has that combination.

80% of Russian territory is in risky agricultural zones while only 25% of US land is risky.

As a result, droughts occur in Russia on a fairly regular basis. Historically Russia had a drought every 5 - 7 years and a famine every 10 - 13 years. Golubev and Dronin's report gave the following table of major droughts in Russia during the last century:

CENTRAL: 1920, 1924, 1936, 1946, 1972, 1979, 1981, 1984.

SOUTHERN: 1901, 1906, 1921, 1939, 1948, 1951, 1957, 1975,1995.

EASTERN: 1911, 1931, 1963, 1965, 1991.

It is obvious, looking at the scattered drought years, that no one climate phenomenon is responsible for Russia's droughts. However, if one examines history, the most severe droughts have tended to correlate with periods of time when the Pacific Decadal Oscillation is negative - as it has been this summer.

The most recent droughts and heat waves were in 2003 and 2006. The current event is right on schedule. With the recent negative turn of the PDO, Russia is facing another two or more decades of more frequent and severe droughts.

David Fuller's view Don't miss the section on Russia's current drought and its impact on wheat prices. The Browning Newsletter also includes forecasts for weather conditions around the globe in the months ahead.


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