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23 December 2024

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THE NATIONAL AGRICULTURE PROJECT BRINGS NEW OPPORTUNITIES AS WELL AS CHALLENGES

FC-Novosti, Business mir #7 - 2007-07 MAIL PRINT 
“The harvest will be at least the same as last year, but we are facing many issues, including unfair competition,” says Russia’s Agriculture Minister Alexei Gordeyev in an exclusive interview with BM’s Alexei Podymov.
The agricultural sector, which accounts for roughly 8.5% of Russia’s GDP and 12% of its industrial output is about to complete its transition from a Sovietstyle government economy to an open market. With 27% of population, over 38 million people, living in rural areas, Russia is aware that robust agriculture means not only food security, but also social stability.
Alexei Vasilievich, many say there are increasing signs of recovery in Russia’s agriculture? Is that due to some radical changes introduced since last year?
Most importantly, that was the eighth year of growth in a row, on aggregate by 34.5% between 1999 and 2006. It is the longest period of sustained growth in this sector for the last 50 years.
We have yet to fully recover from the half-size output we had through the 1990s, and are now at three quarters of the figures recoded in the last Soviet years. Livestock farming is our prime concern. While plant farming has seen growth over the 1990 figures since 2004, livestock farming still lags at around half the Soviet level.
Can you giver any figures for the last year?
According to the Federal Service for State Statistics, the positive trends persisted, and real output growth even exceeded statistical forecasts – 2.8% against 1.6%, plant output increased by 2.1%, livestock by 3.7%. The Agricultural Development Priority National Project is largely behind the growth.
Despite adverse weather throughout the last year, the net crops stock turned out to be even larger than in 2005 – at least 78.5 million [metric] tons. This is enough to provide the nation with locally produced food and fodder crops and export up to 10 million tons. Some other plants also demonstrated very good results. The last year also saw 5.4-% growth in manufactured food output.
About 3.2 million tons of water bioresources were consumed; it is also an increase year-on-year.”
Figures, however, are not really convincing without qualitative changes.
Of course there were some very important changes. For a start, the sector on the whole posted a profit, which it had not done for many years. The share of loss-making farms is far less than previously.
This breakthrough was especially visible in 2006, for four main reasons.
The first is the national project for agriculture. This is the first time in our recent history when agriculture was highlighted as a key priority for the government. The project galvanized all state authorities, from federal to municipal.
It also encouraged result-oriented approach to agricultural business and inspired primary food producers.
The second is the first specialized agricultural census since 1920, which gave us a brilliant insight of Russia’s agricultural economy and necessary information for proposing a wellbalanced state agricultural policy.
The third is the adoption of the longoverdue Agriculture Development Law that set the targets, legal base, and dimensions of a federal agricultural policy as part of the state social and economic policies. This law is already a basis for a 5-year State Agriculture Development Program 2008-2012. The Program will set – significantly increased – specific allocations for state financial support.
It will also define targets and criteria for customs, competition, and tax regulations. In the future, the Program will be further developed on the basis of the Agriculture Development National Project, which we hope will make the entire agricultural sector a high priority for the government.
The fourth is Russia’s accession to the Food and Agriculture Organization, championed by the Soviet Union in the past. FAO is the United Nations’ chief watchdog for the implementation of decisions made by the international community with regard to agriculture and food production, including global trade, sustainable development, and environmental issues. Right now, Russia is starting its involvement in FAO’s permanent bodies, the official introduction of the Russian language, liaison with Russian organizations, staffing of the Russian part of the Secretariat, alignment with FAO’s international treaties, humanitarian aid, and voluntary donations.
“So what about the National Project then?”
Agriculture certainly deserved such treatment because of the sharp decrease in livestock production and, most importantly, the drop of meat and dairy consumption per capita – 75 kg of meat and 385 kg of dairy per year in 1990 against 55 kg and 235 kg, respectively, now. The goal was clear enough: to ensure local supply of as much meat and dairy produce as to satisfy constantly growing demand. There are three main dimensions to the project: livestock, small farming, and incentives for young specialists, including affordable housing. On the whole all three are doing well.
In livestock, in the past years plagued by near-zero growth, we have seen an aggregate output increase by 4.8%: up 14.7% for poultry and up 8.7% for pork.
Note that this is the first time there has been some growth in pork, which we think is a direct consequence of the national project. Milk production increased by 0.8% against last year’s decrease by 3.2% - a major breakthrough which could also hardly have been possible without a national project support. Milking efficiency increased by 8.5%, yielding 3,600 kg of milk per year a huge increase over the record 2,800 kg in the Soviet times. Cattle numbers were still falling in the last year but the rate of decrease halved to 1.2%.
By the end of this year, we hope to see a flat quantity there. This was all helped by affordable capex loans. About 1,300 project beneficiaries got on aggregate 59.2 billion rubles in loans, about 50% above the 40-billion-ruble target for the last year. Rosselkhozbank and Sberbank, the two main underwriters, accounted for over 80% of the loan portfolio.
Rosagroleasing, the government agricultural leasing vehicle, also exceeded our expectations, providing 50,200 (100.4%) heads of pedigree stock worth 2.4 billion rubles, and equipment for the indoor accommodation of 70,800 heads (121%), worth 700 million rubles.
Small Farming has been focused on providing more cheap loans to increase the number of small, single- household, farms across the nation.
Here the government pays back interest to commercial banks crediting small farmers, according to the Central Bank interest rate, of which 95% is paid by the federal and the other 5% by the regional authorities. Our expectation for the total amount of these small loans (20 billion rubles for 2006) was doubled (41 billion rubles), while the number of issued loans (182,000) was almost four times higher than the target (50,000).
Rosselkhozbank alone issues about 3,500 such loans every week.
Compared with the previous year, five times as many loans were issued for farmers, 40 times as many for personal part-time farms, and 90 times – for co-operative farms. This year, we expect to issue another 200,000 loans. Co-operative farms (CoF) is a very important point of the national project.
They are to provide a network of infrastructural enterprises focused on procurement, logistics, sales, and manufacturing.
The 2006 target for the number of CoFs (1,200) was almost doubled as 2,134 such enterprises were established.
Now it is most important to make sure that these farms are more than just figures on paper, that they really work.
We have worked hard with regional agriculture regulators to clarify the importance of their role in facilitating this process.
Mortgage loans are another very important driver of agricultural development.
Last year, Rosselkhozbank issued 65 land-secured pilot loans worth 2.1 billion rubles. The project will be further developed this year.
We also met the targets for the third dimension of the national project, affordable housing for young families and young higher education graduates in annual crops production and make about half the annual production of high-class wheat.
We have learned from other countries where agriculture is more efficient that their success is largely driven by highperformance cultivars, and well-tailored rural areas. The federal investment of 2 billion rubles gave us 713,800 square meters of housing area for 16,225 participants (3,532 of them are social workers).
Growing housing prices, however, threatened to impede the implementation process as rural housing prices grew on average by 29% in 2006. We had to raise 1.8 billion rubles more from outside sources, which means that we must add at least 500 million rubles to this year’s cost sheet.
What impact of the past anomalous winter do you expect this year, now that the spring sowing campaign has started?
The sowing campaign is a very important period of the agricultural year.
Each day in spring may prove crucial for the rest of the year. This year will be somewhat different compared to all previous years.
First, the growing livestock industry is going to require additional 5 million tons of fodder, including 3 million tons of crops – this is a planned increase of about 10%.
Second, energy policies are changing globally: we can see a new large market for our oil crops as the European Union increases the use of biofuels. We have prepared recommendations to farmers to sow and process more rape, sorgho, and other exportable oil crops. Together with Gazprom, we have prepared an action plan to increase the use of methane as the primary motor fuel in rural areas.
After an anomalous winter, we need to reassess the current status of winter crops. Because of heavy rains last fall, farmers have sown 14.2 million hectares of winter crops, 200,000 hectares less than the previous year.
Their current status is satisfactory.
This is good news because winter crops typically account for 40% of overall annual crops production and make about half the annual production of high-class wheat.
We have learned from other countries where agriculture is more efficient that their success is largely driven by highperformance cultivars, and well-tailored and optimally dosed use of → fertilizers, chemical protection, and irrigation. Every year, we promote new methods and new technology that helps implement them in themed Russian Field Day shows. We go to a real field to demonstrate innovations and recruit people for training. All these measures will, hopefully, ensure that this year’s harvest will be at least the same as last year.
What are the sector’s most troubling issues?
Agricultural development is still impeded by several systemic issues. The first and very long-term one is that the prices for everything the industry needs – first of all, energy - grow much faster than the prices for anything it can offer.
By some accounts, this price misbalance stripped the agricultural sector of at least 500 billion rubles of revenue.
With such incomes, farmers just cannot raise funds for re-equipment.
Farmers themselves did their share in increasing energy efficiency: currently they spend three times as little fuel per 1 hectar of arable land than in 1990, but fuel prices are still growing too fast – 15 times faster than the price of wheat since 1990. This will still be an issue in the midterm as natural gas prices will grow more than twice and electricity by at least 50% by 2010.
The second issue is, again, a desperate need for re-equipment. With old machinery, labor in our agriculture is still less efficient than in developed countries.
The third issue, stemming from the first two, is low living standards in rural areas. With the average wage in 2006 of 4,300 rubles per month, only 40% of the average wage across the nation, you really can not attract young, ambitious and creative people to live in villages, create families and work there. They are leaving for bog cities.
The fourth issue is land regulation. We are ready to submit our proposals on land regulation – notably on leasing, mortgages, and land usage restrictions – to the Government and Federal Assembly to facilitate access to land for farmers and prevent corrupt officials and businessmen from illegally lifting usage restrictions for “attractive” plots of arable land. The Agriculture Ministry plans to draft a Federal Target Program for land regulation and press again for the right to propose bills concerning the usage of arable lands.
The fifth issue is the need for an efficient sales policies at home and abroad.
Without such policies, we are facing totally unjustified growth of agricultural imports. Customs officials have reported $21 billion in food imports at the same time year, 21-% increase year-on-year. Remember that local food production increased only by 2.8%. This trend will probably persist in the four coming years: imports are likely to grow ten times as fast as the national agricultural output.
That’s competition for you, people might say - if you can’t survive, that’s you own headache. Our analysis, however, shows that we import food mainly from countries that heavily subsidize their own producers. Last year, the EU and U.S. accounted for 85% of imported poultry; the EU, U.S. and Canada combined made up 60% of imported pork; the E.U. accounted for 40% of imported cheese and 50% of butter.
So, if we have to compete with such heavy subsidies, is it really surprising that Germany, Denmark, and Canada doubled their pork exports to Russia last year? The recent problem with Polish meat looks a little exaggerated to me but even there we have fought against dumped prices. Ten thousands of tons of meat have been imported illegally. In other words, we are facing what can only be described as unfair competition.
This, in turn, creates a new problem: as national food production – especially poultry, pork, and milk – grows thanks to the national project, we can see a need to fight back against those who occupied the marketplace.
The last, but by no means least, issue is industry governance. Under the new Agriculture Development Law, we need to work hard to make sure that farmers’ unions and associations have enough access to the regulation-making process and can really influence state agriculture policies.
This year has brought new opportunities, as well as challenges and threats with it.
We do not expect the coming years to be much different in this respect.
FC-Novosti, Business mir #7 - 2007-07  MAIL PRINT 
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Ежедневные новости и аналитика из Швейцарии и Европы, политика, экономика, интервью

Daily news and analytics from Switzerland and Europe, policy, economy, interview