August 19, 2014 4:01 pm

Russian agriculture struggles to meet self-sufficiency challenge

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A customer selects trays of peaches from the fruit section inside a supermarket in Moscow, Russia, on Friday, Aug. 8, 2014. Russia's President Vladimir Putin decreed that imports of meat, fish, vegetables, cheese and dairy products from the U.S., European Union, Norway, Canada and Australia be stopped, effective yesterday, and called to replace them with local products. Photographer: Andrey Rudakov/Bloomberg©Bloomberg

The harvest workers at Sovkhoz Lenina carry the apples to the trailer one bucket at a time. Soon the ripe load piles up under the balmy sun, ready for customers in nearby Moscow, who are hungry for fresh, healthy, homegrown produce.

Since the Russian government banned food imports from western countries earlier this month in retaliation for sanctions over the Ukraine crisis, Moscow has been trying to persuade consumers that domestic produce is better and telling farmers that Russian agriculture’s time has come.

“We are a country that can and must feed itself – and not only feed itself but supply other countries,” said Dmitry Medvedev, prime minister, last week.

But this goal appears elusive. Although the Russian Federation has one of the largest areas of arable land per capita in the world, the country relies on imports for up to 40 per cent of its food supplies. Farmers say it would take years of hard work and huge, wide-ranging investments to change that – a feat few believe will be achieved.

“That Polish apple farmers are pulling their hair out over the import ban does not help us – the embargo will not last long enough for us to benefit,” says Pavel Grudinin, director of Sovkhoz Lenina, a former state farm. “Instead of Poland, we will now compete with Chile. And compete we can’t.”

Despite the upbeat message about forthcoming self-sufficiency hammered home by state media, government experts agree.

Crop production
Land under cereal production

“Today in Russia we have the unique situation that good, ecologically-grown apples can’t fetch nearly the same price as imported ones,” says Dmitry Yuriev, deputy minister of agriculture. “Up to half of the fruit production from small farms and 20 per cent of industrial vegetable production just rots away.”

The root of the problem lies in the country’s long, tortuous transformation from its communist past. While the Soviet Union prided itself in self-sufficiency, it was achieved with low yields and little choice for consumers. Since the USSR’s collapse in 1991, the total area under cultivation in the country has dropped from over 90m hectares to just 73m ha.

Livestock production

When Russia discovered capitalism in the 1990s, its new entrepreneurs focused on quick profits in trade, mining and financial services. State farms were broken up, but few could raise the money needed to modernise their production methods and systems bringing goods to market. Many peasants left their land to find work in booming Moscow.

The government has had some success in addressing these problems. With subsidised financing through state banks and leasing companies, it has helped rebuild some of the pork and poultry production capacity lost since the fall of communism. Between 2008 and 2012, poultry production grew 60 per cent and pork production 36 per cent.

Russian rural population

But Moscow is wary of moving too fast. Mr Yuriev says boosting grain or pork production too quickly might trigger price drops, creating financial difficulties for the investors the government is trying to encourage.

Instead, the government now wants to modernise the fruit, vegetable and milk sector. The main reason for the big losses and low yields in fruit and vegetable production is the absence of a nationwide modern logistics and storage infrastructure.

Mr Yuriev says the restive North Caucasus republic of Dagestan could supply a wide range of high-quality fruit and vegetables that are now imported. But much of Dagestan’s produce is processed instead – into juice concentrates, for example – because there is no infrastructure for storing and transporting fresh products.

The agriculture ministry is developing plans for a nationwide wholesale logistics system, which could consist of about 15 hubs and be operated with state participation. But this is unlikely to be in place quickly.

Another new programme will focus on organising milk farms into co-operatives that can help with quality control, logistics and marketing. It will not be a quick fix either – Mr Yuriev says transforming the sector will take up to eight years.

Top 10 countries by arable land per capita

“We are very happy that the state is finally paying attention to us,” says Andrei Danilenko, president of the National Union of Milk Producers. “The question is not whether demand for milk products can be met but whether we can build a viable industry – that is not a question of national pride but economics.”

The industry body complains that Russia’s agricultural subsidies per hectare are a fraction of those in the EU and demands that Moscow double its subsidies.

While the low level of subsidies is recognised across the industry and even by the government, many small farmers believe that even big, new government pledges for support will be useless.

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“The government has never done anything for agriculture other than put obstacles in our way,” complains Vasily Melnichenko, who heads a small farm in the Urals. A veteran former state farm manager, Mr Melnichenko has seen agricultural enterprises he headed been broken up twice by what he says were bandits.

The small vegetable and rabbit farm he now runs cannot get bank loans and pays three times more for electricity than the aluminium plant nearby, which belongs to the group of Oleg Deripaska, one of the country’s richest oligarchs.

Such troubles are common for small farms, as they are for private businesses across most industrial sectors.

Mr Melnichenko is pessimistic that anything will change. “The government does not want to help us survive, in fact they want us to vacate the land so big business can come and extract resources from our land as well,” he says. “That is what Russia will always do: export oil and gas.”

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