World Grain - September 2024 - 26

FEATURE: RUSSIA TIGHTENS GRIP ON TROUBLED GRAIN INDUSTRY
be in peril, with profitability standing that low.
In general, 20% of average profitability in
Russian agriculture is seen as a critical level,
beyond which the investments no longer seem
feasible, the agricultural ministry said.
There are no reasons to believe the profitability
situation will improve in 2024, Fastova
admitted.
This year, unexpected May frosts, which
killed harvests in the central European and
southern parts of Russia, have made the profitability
situation even worse, said Arkady
Zlochevsky, president of the Russian Grain
Union. He described the situation in the grain
industry as difficult.
" Either we will face the return of very difficult
economic conditions for grain farmers or
difficult conditions for financing from the state, "
Zlochevsky said.
Moreover, in some niches, there are even
more reasons for concern. In the wheat segment,
the average profitability dived from 33%
in 2022 to almost minus-1%, the Russian state
statistical service Rosstat reported.
Zlochevsky admitted that the present investment
level in the wheat segment is extremely
low. Export duties are largely to blame, he said,
as this year the government seeks to collect 250
billion roubles ($2 billion) from grain farmers.
Remarkably, the share of unprofitable farms
is on the rise, with every fifth farm estimated to
have suffered a loss last year. The overall losses
suffered by farms failing to generate profit are
estimated at 100 billion roubles ($1.15 billion),
up from 86 billion roubles ($1 billion) in 2022.
Farmers usually name the main reasons for
their current predicament: soaring operational
costs and excessive state regulation.
The Russian government harbors plans to
boost the agricultural industry's output by 25%
and exports of the key commodities by 50%
through 2035. The reality, however, is that the
Russian grain industry is exhausted and lacks
resources to facilitate that growth.
In a recent report, economists from the
Institute of National Economic Forecasting of
the Russian Academy of Sciences emphasize
that two decades of intensive growth in agricultural
production in Russia have turned domestic
agriculture into a source of instability, particularly
warning about the fallout of the current
government policy.
" The policy of containing domestic prices
by limiting the export of agricultural products
26
Russia seeks to
expand arable land
Seeking to fortify its role as the global agricultural
powerhouse, Russia targets to put millions of hectares
of agricultural land in operation in the coming
years. The plan, however, requires enormous funds
from the state and private companies, with return
on investments remaining questionable.
In 2024, the Russian Agricultural Ministry finished
studies of the agricultural land potential for 36 regions,
which comprise about half of the country.
Nearly 13 million hectares was found to be abandoned,
of which 5.1 million hectares could be
quickly put into production, the ministry said.
The work in the rest of the country is due to be
completed by 2025. However, the ministry already
stipulated that the potential for expanding the agricultural
industry's output is huge.
Starting this year, potential investors will get special
offers related to unused agricultural land, the
ministry said, explaining that businesses will be eligible
to get land under a simplified procedure.
This is not the only thing the government wants
to get simplified. Alexander Dvoynykh, chairman
of the Federation Council Committee on Agrarian
Policy, recently asked lawmakers to withdraw a
moratorium on agricultural land inspections.
He justified the step with a need to identify land
plots, " clearly not used for agricultural activities. "
The step would pave the way for the government
to seize land from unscrupulous farmers and pass it
to those willing to use it for its direct purpose.
In 2024, the Russian government plans to spend
40.7 billion rubles ($470 million) to return agricultural
lands to production. In addition to fields abandoned
following the collapse of the Soviet Union,
the Russian authorities want to start operations
in the Arctic zone, where permafrost retreated in
recent decades due to global warming. However,
experts believe that resuming activities on unused
agricultural land makes little economic sense.
" If the land has been abandoned for several
years, then there is definitely an economic sense in
putting it into production - you just need to plow
it and get rid of the weeds, " said Andrey Golokhvastov,
general director of Agroconsult, a local think
tank. " These are relatively small costs. If the plots
have not been used for 10 to 20 years, then likely
you'll have to uproot trees, carry out melioration
and land improvement work. Returning such land
to cultivation, as a rule, is no longer economically
feasible. "
September 2024 / World Grain / World-Grain.com
http://www.World-Grain.com
World Grain - September 2024

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