Agriculture in Russia
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Agriculture in Russia is struggling to rebuild as it transforms itself from a command economy to a market-oriented system. Following the breakup of the Soviet Union in 1991, large State farms had to contend with the sudden loss of heavy government subsidies. Livestock inventories declined, pulling down demand for feed grains, and the area planted to grains dropped by 25 percent in less than ten years. The use of mineral fertilizer and other costly inputs plummeted, driving yields downward. Most farms could no longer afford to purchase new machinery and other Capital investments. After about ten years of decline, Russian agriculture hi began to show signs of modest improvement. As in Ukraine, the transition to a more market-oriented system has introduced the element of fiscal responsibility, which has resulted in increased efficiency as farmers try to maintain productivity while struggling with resource constraints. Official data indicate a rebound in Russian grain yield in recent years, and although the bumper harvests of 2001, 2003, and 2004 are due in large part to favorable weather, most analysts agree that the gradual improvement will continue.
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[edit] Ownership
The Russian agricultural privatisation programme can be traced back as far as 1989–90 when Soviet legislation allowed, first, the creation of a non-state enterprise as a co-operative; second, the denationalization of land and non-land assets by transferring them legally from the state to kolkhozes and sovkhozes. While personal subsidiary plots have long played a key role in Russian agriculture, legislation enabling independent private farms was enacted only in December of 1990. This legislation provided three means for the formation of private farms. One is that a member of a collective or state farm could claim his or her share of land and equipment from the collective and exit to form a small farm. State and collective farms were also required to turn over of portion of their "underutilized" land to the local Soviet. This land is to be distributed to other persons who wanted to become farmers. Persons who want to become farmers can also buy land from the state or lease it from other owners. In addition to providing enabling legislation, the Russian government also provided subsidies for private farmers. With the introduction of the Law on the Peasant Farm in December of 1990 and subsequent laws and decrees defining the legal forms of large agricultural enterprises and of land ownership and the procedures for certifying and exercising ownership rights, it was expected that private holdings would be created in rural areas and the kolkhozes and sovkhozes would be restructured. But as it turned out few peasants were interested in establishing individual farms, and management and operating practices inside large agricultural enterprises remain largely unchanged.
The privatized Sovkhoz and Kolkhoz became “Corporate farm”. These farms were legally reorganized and turned over in their entirety to the farmers and pensioners. These farms continue to operate largely as they did under the Soviet system. Today, the term “corporate farm” is an all-inclusive phrase describing the various forms of privatization that did not involve breaking parcels of land off from the original farm.
Russia has achieved tremendous progress with land privatisation, as the share of state-owned agricultural land declined from 100% in 1990 to less than 40% in 2000. Unfortunately, privatisation of land ownership so far has not resulted in transfer of direct control to individuals, and most land privatised by the state is managed and cultivated by large-scale successors of former collective farms.
In 2003, private farms accounted for 14.4 percent of Russia's total grain production (up from 6.8 percent in 1995), 21.8 (10.9) percent of sunflower seed, and 10.1 (4.0) percent of sugar beets. Private household plots, with a maximum size of 2 hectares (5 acres), produce an astonishing 93 percent of the country's potatoes and 80 percent of the vegetables, either for personal consumption or for sale at local markets, but only about 1 percent of grains and technical crops (such as oilseeds and sugar beets). Another problem is that rural infrastructure which would provide processing and business services is not in place while tax rates are high. Families striking out on their own also lose eligibility for social services that are traditionally provided by the local corporate farm instead of the municipality.
[edit] Private plots
The role of household plots has grown with production increasing from 32% of production in 1992 to 57% in 1998[1]. Both production and sales, measured in weighted kilograms a standardized measure for the purpose of statistical comparison across product type, have increased to an average 8,765 weighted kg production in 1999 with 4,463 weighted kg in sales. Rented land has increased to an average of 4,000 square metres in 1999. Average adjusted income for rural Russian households has tripled between 1997 and 1999 to 1,524.7 rubles per month; while, considering both money and non-monetary income, the percentage of rural households living in poverty has decreased from 28.9% in 1997 to 17.1% in 1999. Households produced 56.6% of the meat and 48.2% of the dairy products in 1998.
[edit] Planting and harvest dates
The winter-crop planting season stretches over nearly three months. The sowing campaign begins in August in the north and advances southward, concluding in late October in the Southern district. Spring grain planting in European Russia usually begins in April and progresses from south to north. The "summer" crops--chiefly corn and sunflowers--are last to be sown, and planting is approaching completion by late May or early June. The harvest of the small grains (chiefly wheat and barley) moves from south to north and begins in late June in extreme southern Russia. Harvest operations are in full swing by early July and largely finished by mid-to-late August. Corn and sunflower harvest begins in September and continues through October. (View regional crop calendars.)
In the spring wheat region, planting typically begins in May. Oats are sown first, followed by wheat, then barley. Planting is concluded by June. Spring wheat advances through the reproductive stage during mid-July, when temperatures climb to their highest levels and grains are most vulnerable to heat stress. Grain harvest begins in late August and continues through October. It is not unusual for a significant portion of the Russian grain crop--millions of hectares in some years--to remain unharvested, due chiefly to unfavorable weather during the harvest campaign. In an average year, 10 percent of the area planted to spring wheat is abandoned compared to 97 percent of the country's winter wheat area.
[edit] Harvest
Since the demise of the Soviet Union, grain harvest fell drastically. Severe drought in 1998-1999 led to a harvest of 48 million tons and 60.2 million tons respectively, adding more to the economic crisis that hit Russia in 1998, and thus forcing Russia to accept humanitarian aid. In 2006, Russia harvested 78.4 million tonnes of grain. In 2007, Russia harvested 81.5 million tonnes. 2007 crops production exceeded the level of 1990 by 10%, while livestock output was lagging behind the 1990 level by about 30%.
[edit] Farms credit
While agricultural policy in Russia had been poorly structured and largely unsuccessful, some basic trends have helped to create forces for change. The first is thatstate tax revenues have been falling, and hence the spending capacity for agricultural policy has been falling. Total federal transfers to agriculture fell from 10% to 4% of GDP from 1992 to 1993, and budgeted transfers for 1994 are about 2% of GDP.
There has been improvement in the agricultural credit situation in Russia over the past five years – for some farms, at least – due largely to subsidies from the federal government. The national project for agriculture has given impetus to the growth of small farms. During 2006, 36 billion rubles in credit were given to more than 100,000 recipients (as compared to 3.4 billion rubles in credit to 2,500 borrowers in 2005). Traditional farms and personal plots play an important role in the sector, providing more than 87 percent of all production.
The State offers in-kind credits, whereby seed, fertilizer, and other inputs are provided in exchange for grain harvested at the end of the season, though the use of in-kind credit is reportedly decreasing. The government also provides subsidies for the purchase of plant-protection chemicals and fertilizers, and subsidizes two-thirds of the interest rate on loans from commercial banks, which provide the majority of farm credit. Banks remain cautious and insist on certain farm management practices and minimum levels of input use before granting loans (a policy which, according to some observers, has had a significant positive effect on overall efficiency in the agricultural sector), but banks’ confidence is boosted by increasingly reliable guarantees from regional administrations who see stability of food production as a high priority. Banks recognize the inherent risk in agricultural financing, but also see agriculture as less risky than other industries and are generally willing to lend money to solvent, well-managed farms.
Over fifty percent of Russia’s farms, however, are already saddled with considerable debt, due in part to the disparity between grain prices and production costs, and few farms are able to offer sufficient collateral to secure a loan. As a result, many farms are forced to rely on outside investors to guarantee loans. These investors, frequently referred to as holding companies, typically are large, cash-rich, traditionally non-agricultural companies that became involved in agriculture over the past five years. Some viewed crop production as a potentially highly profitable venture, and others were working to guarantee raw materials for vertically-integrated food-processing operations. Holding companies possess assets that satisfy banks’ demand for collateral, and a farm that receives a commercial loan with the help of a holding company is still eligible for the federal interest subsidy. Many holding companies, particularly those who were attracted to agriculture by the high grain prices during 2000, have lost interest in crop production following two years of low prices and are bailing out. Investments in crop production don’t pay off quickly, in contrast to investments in trade. Although some holding companies remain comfortable with the variable profitability of agriculture and will continue to work with farms, several prominent commodity analysts feel that the overall involvement of big companies in agriculture is declining.
This means that current prospects for significant, long-term investment in agriculture – particularly the purchase of agricultural machinery and grain-storage facilities – are somewhat dim. Land reform has been evolving in Russia since the basic right to own farmland was established in 1993, but "landowners" are still unable to use land as collateral in securing a loan. The situation, however, is not one that can be resolved quickly or easily through legislation alone. There is no mechanism currently in place to enable banks to evaluate the value of land based on its productivity before issuing loans, and banks likely would be reluctant to use land as collateral regardless of legislation. Furthermore, there are restrictions against non-agricultural use of land that is currently used for agriculture: if land is used for other purposes, the owner loses the title to the land. This imposes a limit on the land’s "re-sellability," and, in turn, its value. The use of land as collateral appears to be a remote prospect.[2]
[edit] State investment program
In December 2006, the State Duma passed a law requiring a state program for investment in agriculture to be passed every five years. This is the first of those programs. Between 2003 and 2007, agriculture received 37.1 billion rubles' support per year.
[edit] See also
[edit] Further reading
- Edited by David J. O'Brien and Stephen K. Wegren, Rural Reform in Post-Soviet Russia, Johns Hopkins University Press (2002), hardcover, 430 pages, ISBN 0-8018-6960-9
- Grigory Ioffe and Tatyana Nefedova, Continuity and Change in Rural Russia: A Geographical Perspective, Westview Press or Basic books or Lightning Source Inc (1997 or 1998), trade paperback, 328 pages, ISBN 0-8133-3634-1
- Stephen K. Wegren, Agriculture and the State in Soviet and Post-Soviet Russia, University of Pittsburgh Press (1998), hardcover, 293 pages, ISBN 0-8229-4062-0
[edit] References
- ^ O'Brien, David J.; Wegren, Stephen K (2002). Rural Reform in Post-Soviet Russia. The Woodrow Wilson Center Press, 116/488. ISBN 0801869609.
- ^ Shagaida, Natalya (2005). "Agricultural land market in Russia: Living with constraints," Comparative Economic Studies, 47(1): 127-140.
[edit] External links
- "Geographical Differentiation in Household Plot Production in Rural Russia" by Judith Pallot and Tatyana Nefedova in Journal of Economic Literature
- Foundation for Agrarian Development Research (FADR) English and Russian.
- Agroresources Net (all Russian)
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