Competitors from the boundless Eurasian expanses are breathing down the necks of American farmers and farmers in Canada, Australia, Europe and other countries. While world markets are still a long way from panicking, if grain production continues to increase at the same rate, in 8-10 years, these large former Soviet states will claim 20% of the market. After almost a century, Russia is going to reclaim the title of Europe's main granary.
And this, at a time when average grain yields in Russia are barely 2 metric tons per hectare, and the forbidding climate in Siberia, the Southern Urals, and a large part of the Volga Valley makes grain farming unpredictable and all the country's agriculture highly risky. Agriculture Minister Alexei Gordeyev is convinced that with state support the agriculture sector will be able to produce up to 120 million metric tons of commodity grain a year and export up to 20 million metric tons annually. The benefits from developing this sector are clear: grain production accounts for 75% of profits in Russian agriculture. While the profitability of poultry farming is 18%-20% and the profitability of cattle and pig farming is 36% and 31%, respectively, grain growers boast a profitability of 112%.
The minister's arguments - fertile and cheap land, experienced farmers, market relations in the countryside and Western equipment and technology - sound convincing. Russian grain, because of a lack of adequate fertilizers or rather thanks to it, is chemically the purest grain in Europe. Gordeyev thinks that Russian wheat can safely be grouped with ecologically clean, or green products, which are very expensive in Europe.
Gordeyev is convinced that the high world grain prices due to steadily growing demand which has reduced grain stocks by 25%-30% in main grain growing nations in recent years, is a good incentive for Russian farmers. Exports help reinforce reforms of Russian agricultural sector, which has grown by 4.8% a year over the last five years. Before that, the sector had declined 5.5% a year for eight years. Now farming accounts for 6%-7% of GDP (12% in the US). According to the minister, the current indices would undoubtedly have been higher had the state approved a long-term agriculture strategy earlier.
"Russia needs a more stringent and adequate regulation of food imports," he said in an interview, "which are subsidized and of low quality ... Russia should stop being used as a food dump, where you can bring anything you like." He said he welcomed tougher Russian plant sanitary regulations that erect barriers for dishonest food exporters.
It is noteworthy that the Russian agriculture industry is not developing only thanks to grain. In this context, the progress made in poultry farming is indicative. In the next 5-6 years, the amount of poultry imported into Russia will be cut by half, to 20%. And Russians will gladly give up the title of the largest importer of poultry. By that time, domestic poultry output will reach 3-3.5 million metric tons (1 million metric tons in 2003). A guarantee of the success of this program is the creation of large Russian and foreign agricultural firms and the inflow of massive investments and latest technologies into the sector.
Less noticeable is progress in meat production. Russia still has not reached 1991 consumption levels. Yet even here, there are positive changes: the cattle and pig population is being renewed by the introduction of high-productive livestock. The dairy and meat packing industries are largely modernized, which was how Russian big business reacted to the increased purchasing capacity of the population. Food retail comprises 47% of the Russian retail market ($146 billion in 2003), the largest segment, and will grow at a rate of 12% a year for the next five years. Certainly, Russia is still a long way from the $2,500 billion US retail market, but it is close to Germany ($360 billion) and has definitely surpassed Spain.
Gordeyev may pride himself on being the first Russian Agriculture Minister for almost 100 years to see a revival in farm exports. He said, "There is nothing more shameful than going around the world begging."