Coronavirus helped new agricultural records in Russia
January 3, 2021 10:10 am
The food supply system and agriculture received special significance for Russia in 2020 - many remember, for example, the food hype. How did the coronavirus crisis help the new successes of the Russian agro-industrial complex, what role did government support play in these successes, and what problems in the country's food supply did this year reveal?
According to the results of 11 months of the year, the volume of production of Russian agricultural products amounted, according to Rosstat, to almost 5.7 trillion rubles, which is 1.5% more than in the same period a year earlier. The most significant growth was achieved in the grain segment: in 2020, the second largest crop in the post-Soviet period was harvested in Russia - 132.9 million tons. In comparison with the previous year, the grain harvest increased by almost 10%, and until the repetition of the 2017 record (135.5 million tons) was not enough.
The export of Russian foodstuffs also showed steady growth. Back in early December, Agriculture Minister Dmitry Patrushev said that the annual export plan - $ 25 billion - had already been significantly exceeded, and by the end of the year its volume could exceed $ 28 billion. Both the good grain harvest and the devaluation of the ruble contributed to the intensification of food export.
The number of Russian manufacturers that have managed to enter the world market has grown, notes Elizaveta Naumova, foreign economic advisor at the Ladesol-Tambov biotechnological plant. According to her, this was due to the difficulties faced by the EU agro-industrial complex: for example, consumers in the EU were almost left without fresh vegetables on store shelves, which opened up new opportunities for Russian farmers. The export of pig products from the Russian Federation has almost doubled in the first half of the year.
The potential of Russian agriculture deserves more and more recognition in the world. In March, when food supply chains around the world collapsed during the quarantine period, the New York Times published an article in which it was named this industry as the locomotive that could save Russia from global turmoil. It was noted that thanks to the sanctions wars on the food market, Russia began to actively develop its agro-industrial complex, which allowed it to feed not only itself, but also other countries.
In addition, the American edition reminds the financial analyst of the TradingView, Inc. Igor Kuchma, predicted the future of the Russian agro-industrial complex in the context of global warming. For example, in the Far East, this may turn previously non-irrigated land into plantations of soybeans, corn and wheat, which will allow Russian producers to establish themselves among the main food producers in the world.
“In case of success and correct development, the country will receive additional income,” notes Kuchma. - And given the continued growth of the world population, the demand for food will increase. Against this background, it is not at all surprising that the shares of the three main Russian agribusiness companies - Rusagro, PJSC Cherkizovo Group and PJSC Russian Aquaculture - have grown since the beginning of the year. Moreover, in October, Prime Minister Mikhail Mishustin confirmed that the state will continue to support the industry. "
Today, subsidies for the agro-industrial complex ultimately lead to an increase in the volume of private and public investment in the industry. Moreover, the processing industry is becoming the main direction of investment activity, Elizaveta Naumova believes. According to her, vast territories, the availability of a raw material base, preferential support measures, the availability of a technological base and stable sales markets make it possible to speak of the attractiveness of the Russian agro-industrial complex for investors.
At the same time, representatives of agribusiness and related industries emphasize the need to increase government support. They cite as examples those segments of the agro-industrial complex that in Russia actually appeared out of the blue. The current attractiveness of investments in the agro-industrial complex is difficult to compare with the period of 2014-2016, when a variety of measures to support the industry were actively working, says Bogdan Grigoriev, General Director of the Rosagromarket holding, which develops the federal network of wholesale distribution centers. In his opinion, the most important of these was the 20% reimbursement of capital expenditures to investors - it was this measure that made it possible to create a large-scale greenhouse industry in Russia. “Despite all the difficulties, in just a few years Russia has finally got its own winter tomatoes and cucumbers,” the expert says.
New fronts for import substitution
However, for ordinary Russians, the fall in the ruble exchange rate also did not go unnoticed. Almost all food producers and agricultural experts say that this factor had a significant impact on the cost of food. In addition, the rise in food prices was facilitated by a decrease in yields of a number of basic crops, especially sunflower (according to preliminary data, minus 13.7% in 11 months), sugar beet, the production of which fell by 40.5%, and potatoes (it was harvested by 10, 9% less than in 11 months of last year).
A significant part of raw materials and equipment for agriculture is purchased abroad. This affects the price of the final product, explains Dmitry Matveev, president of the Kabosh group of companies, which specializes in the production of cheese and greenhouse vegetables. According to him, his agribusiness in 2020 lost 300 million rubles on the exchange rate difference:
“When we entered into a contract for the purchase of equipment abroad, the ruble exchange rate was the same, and when the payment was made, the rate had already seriously fallen. We also buy seeds abroad. Fertilizers are in Russia, but fertilizer prices are formed in dollars because they are exported. Feed additives, starter cultures for cheese production - all these are also imported products. Therefore, we are forced to raise prices for our products. But we do it very carefully. Limited consumer demand forces us to conduct a more flexible pricing policy, adapting to the real possibilities of consumers. This inevitably hurts the company's revenues, but I understand that the time is now - it is important just to survive, to keep the business. "
However, Dmitry Matveev adds, manufacturers of high-quality products have won in any case. Not least of all, this was due to the requirement in force since 2019 to indicate on the labels of natural dairy products that they are produced "without milk fat substitute." “More and more people are paying attention to the origin, product composition, shelf life. Many people care about the quality of what they buy and eat. Here the pandemic made its own adjustments, forced Russians to be more attentive to their health, ”says Matveyev.
Products that depend on the dollar exchange rate in the agro-industrial complex occupy about 25-30% - this is soybean meal, premixes, feed additives, veterinary preparations, amino acids, hatching eggs and day-old chicks for parent flocks, etc., adds Elizaveta Naumova. As a result, about a third of the types of domestic products indirectly depends on the dollar exchange rate.
One of the most memorable episodes of 2020 was the boom in demand for basic foods ahead of the spring quarantine. Many were clearly preparing for the coronavirus as a nuclear war, which led to empty shelves, sudden price increases and other imbalances in the market, says Bogdan Grigoriev. As a result, a general trend emerged - a shortage of current stocks of goods in order to smooth out imbalances in supply and demand. All this reminded of the fact that in Russia, in fact, there are still no significant accumulators of industrial products, not counting, of course, Rosrezerv warehouses.
“The warehouse capacities that retail chains have are rather of a revolving nature. They are not designed for long-term storage of certain types of products, for example, fruits and vegetables. There are practically no more serious grocery stores in the country, where food can be stored from several weeks to several months, which was the reason for what the market faced in 2020.
Russia needs a logistics infrastructure that would play the role of not only a food storage unit, but also a unified system of food distribution for both large and small market players.
In fact, only the chains completely cover their logistics needs - even large agricultural holdings sometimes do not have their own storage facilities. Business has to work on its word, especially in the chain of chilled products: fish, meat, vegetables and fruits, ”the expert says.
The same, adds Bogdan Grigoriev, applies to food exports: it is mainly large companies that can afford to make their way abroad, which are able to seriously invest in product promotion, logistics, and establishing relations with foreign buyers. Therefore, for a serious increase in exports, again, serious infrastructure is needed, like food storage facilities, which allow companies of all sizes to aggregate products at one point, from where they will be sent abroad by trucks, refrigerated containers or trains.
“Agrarian export is just beginning to play a significant role in filling the budget, and this is mainly happening in the grain segment,” Grigoriev sums up. “If Russia really wants to become a serious player in the world food market not only in the grain segment, state support for exports needs only to be increased.”
For the sake of creating favorable conditions for agricultural exports, federal projects until 2024 provide for an increase in the throughput of transport highways, the construction of six new export-oriented wholesale distribution centers (ORCs), the construction of grain and oil terminals, recalls Elizaveta Naumova. Accelerated deliveries of agricultural products to China by rail will also be organized, customs procedures for agricultural exporters will be simplified, and other measures will be taken to eliminate trade, tariff and administrative barriers.
Text: Mikhail Kuvyrko