Minister Alexander Tkachev gave an interview in Rossiskaya Gazeta, in which he spoke about the price development of foods since the sanctions, Russia's road to self sufficiency, the subsidies that his ministry is making available to promote investments in agriculture and the law design focused on the circulation, read possible expropriation, of agricultural land. A small impression of this interview below.
The minister said that the Russian ministry of agriculture wants to regulate the trade of retailers, to reign in the growth of the food prices in the new year. They also want to raise the domestic agricultural production, which is expected to decrease the prices.
Price development of agrarian production in Russia
When asked how it is possible that in the last year the prices of many products have gone up by 1.5 or 2 times the price, despite the official inflation figure being set at 15 percent, Tkachev answered that his ministry doesn't do price regulating. He blames a large part of the price increase on the brokering which saw its chance to raise the prices for their own gain. The sales prices of agrarian producers grew by an average of 7 percent in the last year, whilst the prices in the retail increased by 14 percent in the same period. This is despite farmers having extra costs for seeding material, fuel, energy, fertilisers, crop protection and much more.
In short, the role of the government is to stimulate the growth of the agricultural production, whilst the market has to do its work in determining price. The production only shows positive developments in 2015. 104 million tonnes of grain was harvested, which meant 30 million tonnes could be exported, there was a significant rise in the potato harvest (over 33 million tonnes) and vegetables (almost 16 million tonnes). In the pig and poultry industry there was a growth of 5 and 8 percent respectively in the last year. According to Tkachev this should not lead to considerable increases in price.
Of course, the price increases aren't just the result of the way the retailers work, the general situation in the economy, including fluctuations in the exchange rates had a negative effect on the prices. The costs structure is of essential importance. In general the agrifoodmarket as a whole is quite balanced. There is constant insight into the situation. Fruit and vegetable price increases are mostly seasonally bound, which is mostly down to higher costs in connection with storage and logistics.
Russia's road to self sufficiency
Tkachev indicates that to be able to foresee Russia of fresh vegetables all year round at affordable prices, greenhouses, wholesalers and distribution centres have to be built. This all demands serious input from both the state and private investors. The ministry of agriculture's goal is to be 90 percent self sufficient in greenhouse vegetables by 2020. To achieve this the area of greenhouses has to be doubled. The total investments needed for this amount to 500 billion roubles. The ministry is already working on attracting investors. They are looking at how contributions and subsidies to farmers can be kept and how loans can be subsidised. The bottom line is that using various support measures can make investments in agriculture profitable and attractive. The production of cheese, vegetables, milk, meat and fruit are all supported by stimulating measures.
Self sufficiency in vegetables is at 33 percent at the moment, 81 percent for milk, 75 percent for beef. The goal is to be 85-90 percent self sufficient in milk and meat and 70 percent in vegetables again. In 2015 Russia showed that it can be 100% self sufficient in grain, oil, sugar, potatoes, pork and poultry.
Subsidies to promote investments in agriculture
Last year subsidies were given to 4,500 farming companies. This year farmers will be supported with 14 billion roubles, whilst the total agricultural budget is 237 billion roubles. In all cases the market conditions determine the economic reachability. Right now more than 4 million cows are being kept on the dachas, that Russia needs to produce milk and meat. What has been proposed is to raise the size of the subsidy for starting dairy farms to 1.5-3 million roubles. Tkachev thinks that it would be good to give maximum support to smaller farming companies. 'Create a middle class in the village, which, along with the large complexes, can form the foundation of the Russian agriculture'. The subsidies are for all investors in agriculture, so foreign companies are also welcome.
Ownership of agricultural land by foreigners
The law design focused on improving the circulation of agricultural land is an important theme according to Alexander Tkachev. Around 10 million hectares of agricultural land is abandoned. Without this land the import substitution programme can't be fully realised. A new procedure for revoking the agricultural ground, unless being consciously used, was developed. The decision on this bill will take place in the spring of 2016. The law proposal gives the government the right to seize the land if it isn't used for agriculture for 3 years. At the moment it is 5 years. It is expected that the law will be enforced as of 1 January 2017. Stricter standards on the use of agricultural land by foreigners will also be included in the law.
