Import substitution in agriculture. Gorlov V.V.
Kopein V.V. 1 , Filimonova E.A. 2
1 ORCID: 0000-0002-1962-0467, Doctor of Economics, Associate Professor; 2 ORCID: 0000-0002-1641-502X, Candidate of Economic Sciences, Associate Professor, Kemerovo Institute (branch) of the Russian University of Economics. G.V. Plekhanov
IMPORT SUBSTITUTION IN AGRICULTURE: ASSESSMENTS, PROBLEMS AND ECONOMIC SECURITY
annotation
The article analyzes import substitution in the field of agricultural production as a process. Attention is drawn to the lack of established and sustainable trends in the active development of domestic agricultural production as a reaction to the food embargo. It points to the weakening of economic and food security in the context of the devaluation of the ruble, a decrease in domestic demand, rising food prices and raising the level of its availability for the population.
Keywords: economic security, food security, import substitution, inflation, devaluation
Kopein V.V. 1 , Filimonova E.A. 2
1 ORCID: 0000-0002-1962-0467, PhD in Economics, Associate Professor; 2 ORCID: 0000-0002-1641-502X, PhD in Economics, Associate Professor, Kemerovo Institute (branch) of Plekhanov Russian University of Economics
IMPORT SUBSTITUTION IN AGRICULTURE: ASSESSMENT, CHALLENGES AND ECONOMIC SECURITY
Abstract
This article analyzes the import substitution in the sphere of agricultural production as a process. Drawn attention to the lack of mature and sustainable trends of active development of own agricultural production as a reaction to a food embargo. Indicates a weakening of economic and food security in a devaluation of the ruble, lower domestic demand, rising food prices and raising the bar of its accessibility to the public.
keywords: economic security, food security, import substitution, inflation, devaluation
The development of a system for monitoring and managing economic security is necessary to create a set of development programs for almost all spheres of human activity and sectors of the economy. The global crisis, economic wars, to varying degrees, affected all countries and regions, changed the level of income of the population, adjusted all production relations. The fall in oil prices, even if we consider this process to have almost stopped, will affect the state of the Russian economy for years to come. But, as many experts note, the difficult economic situation in Russia was formed not only by low oil prices, limited access to financial resources, but above all by systemic problems in the economy. By 2014, the growth of the gross domestic product (GDP) had practically stopped; since 2008, the dynamics of GDP had a fading trend. The features of the modern period include the fact that the issues of analyzing the consequences of economic sanctions and adapting the economy to new external and internal conditions, the development of a new development model come to the fore in the theory and practice of economic life.
The positions of politicians and experts, despite the existing disagreements, agree on one thing - the level of national (its components - economic, food, financial and other) security of countries and regions is declining. A special aspect in the security system is the provision of food to the population. The socio-economic situation in the country ultimately depends on the solution of this basic issue of life support - food supply. Issues of price, quality, assortment of food are among the most significant indicators of social status.
The policy of import substitution in the field of food supply, as a reaction to anti-Russian sanctions and food embargo, defined by the Government of the Russian Federation as a priority line in economic strategy and tactics, has not yet, according to various estimates, had a serious positive impact on domestic producers of the agro-industrial complex. The sanctions imposed by the US and European countries against Russia, which limited investment and borrowing, slowed down the development of Russia's agro-industrial complex. The decrease in the supply of imported food has led to this volume being compensated by supplies from other countries that are not subject to the food embargo. According to some estimates, there was practically no increase in domestic production in agriculture.
These trends largely determined the rise in prices for food products in Russia, which, against the background of the depreciation of the ruble, led to a significant decrease in the standard of living of the population. In 2015, the number of unemployed in the country reached 4.1 million people, the unemployment rate was 5.3%. In our opinion, this official level does not reflect the real picture, since it does not take into account hidden unemployment in the form of a reduction in the working week, unpaid leave, etc. Reality also formulates new requirements for the management system of factors and the level of economic, financial security, food security. Additional factors that put pressure on the state of economic security are centripetal trends in the socio-economic development of regions, deficits in regional budgets, and significant differentiation in the dynamics of regional development indicators. Methods for assessing the levels of economic security based on the calculation of coefficients, comparing their values with threshold levels and determining the degree of security by this ratio have not lost their relevance. But the validity of the assessments is increasingly being questioned. The formation of the empirical base of the study is carried out using general empirical methods, among which are the analysis of knowledge systems, monitoring of the main socio-economic indicators, analysis of general and special literature. The applicability of these methods is due to their versatility, easy adaptation to the objectives of the study, as well as low costs for collection and processing.
In 2014, when Russia introduced a food embargo, the assessments of the options for the development of the situation were quite optimistic. The import ban as a factor of pressure on demand, supply and food prices was not announced. In 2014, according to experts, in Russia the share of products prohibited for import in consumption is insignificant: cattle meat - 3%, pork - 12%, milk and dairy products - 1%, fruits - 15%, fish - 14% , poultry meat - 8%, vegetables and root crops - 3%. Therefore, the reduction in imports could be covered by domestic production or supplies from countries that are not subject to the food embargo.
At present, experts' assessments of the situation on the food market, and, accordingly, indirect assessments of the level of food and economic security, fluctuate in a fairly wide range. A number of business representatives define the situation in import substitution in the agro-industrial sector as not demonstrating progressive development. Others are less categorical and are associated with the assessment of import substitution as an established trend. For certain types of goods included in the list of food embargo, there was an increase in production. In January-August 2015, compared to January-August 2014, own production of fresh, cooled, chilled cattle meat - by 9%, meat and offal of edible poultry - by 10.6%, production of steamed, cooled pork , chilled - by 13.5%. In the market of dairy products, own production of dairy products in January-August 2015 increased by 2.7% and the production of cheese and cheese products by 25.1%, butter - by 6.2% compared to the corresponding period of 2014.
A variety of qualitative and quantitative assessments of the situation in the field of food supply does not allow us to present a reliable picture of the progress in the implementation of import substitution. The Russian consumer evaluates these processes by the level of food prices and food inflation. Today, the purchasing power of the consumer himself is limited by a decrease in real incomes, while the increase in the volume of food production and the achievement of the market saturation point has not yet occurred.
The activation of the development of agriculture and the agro-industrial complex is not yet sustainable, irreversible. Many of the reasons we mentioned above are objective. We should not forget about the time lag (on average from 2 to 5 years) for bringing new enterprises to the planned production level. Therefore, all these trends cannot give optimism in assessments of economic and, as its component, food security. According to the main indicators of food security, among which several significant ones can be distinguished: the volume of agricultural production; the purchasing power of the population (the share of the population with incomes below the subsistence level); the share of household spending on the purchase of food products in the average per capita cash income, there is a decrease, which indirectly characterizes the downward trend in the level of food security. There is no positivity in the assessments of economic security as an integral indicator.
According to B. Frumkin, in January-September 2015, compared with January-September 2014, consumer prices for food increased by 21.5%, including for fruits and vegetables - 31.6%, meat and meat products - by 17 .7%, milk and dairy products - by 14.4%. There was a significant increase in prices for goods that are practically not dependent on imports - for cereals and legumes - by 46.1%, granulated sugar - by 44%. As a result, the share of food costs in the consumer spending of the population increased from 27.7% in 2013 to 29.8%. According to the results of the 2nd quarter of 2015, almost 14% of the Russian population (more than 20 million people) have incomes below the subsistence level.
Thus, today the situation in the field of food security is unfolding in the form of rising prices for almost all important food products, and the price increase has two components - direct growth, recorded in digital form, and hidden - in the form of a decrease in the income level of the population and an increase in the availability bar, which does not give grounds for positive assessments of the level of safety. Does not add optimism and assessment of the impact of sanctions on the Russian economy and their future prospects.
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At a meeting on the agro-industrial complex, held in the Stavropol Territory with the participation of the President of Russia Vladimir Putin, the results of the work of the agricultural sector were considered, and strategic guidelines for the development of the country's key industry were identified. Vladimir Putin described the achievements of the agro-industrial complex as a breakthrough: in five years, the volume of agricultural production has grown by more than 20%, domestic producers almost completely provide the country with the main groups of food products, while actively developing foreign markets. Promising export directions today are China, India, the countries of Southeast Asia, Africa, and the Persian Gulf. In 2017, the volume of export supplies of food and agricultural raw materials increased by 21%, exceeding $20 billion. According to Vladimir Putin, the volume of arms sales is 15 billion dollars, that is, in fact, agricultural producers exceeded this volume by 5 billion dollars.
For 7 months of 2018, agricultural exports grew by almost a third, to $13 billion. Today, Russia is the world's largest supplier of wheat and ranks second in the world in terms of grain supplies. The export of sugar, vegetable oil, pork, poultry meat has grown. During the period January-July of this year, the export of grain from Russia increased by 1.7 times, the volume of exports of poultry meat increased by 31%, pork - by 20%, vegetable oils - by 5%, sugar - by 4%. The transition to an export development model is another confirmation that qualitative changes are taking place in the domestic agro-industrial complex, Russian agriculture has reached a new level of sustainability and is becoming less vulnerable to market fluctuations, and domestic food consumption is practically independent of imports.
At the end of 2017, food self-sufficiency indicators amounted to 170.8% for grain, 153.1% for vegetable oil, 105.2% for sugar, 93% for meat and meat products, 87% for potatoes, 85.9% for vegetables, and 85.9% for milk. and dairy products - 82%. From these figures it follows that in a number of positions - vegetables and fruits, dairy products, beef - the level of self-sufficiency of our country is still not high enough.
Based on Rosstat data, WTC experts prepared the dynamics of the production of the main types of Russian products that replace imported ones, as a percentage of the previous period in graphical terms:
According to Vladimir Putin, it is necessary to consistently work to ensure that Russian manufacturers expand their presence in the domestic market and develop foreign ones, so that domestic products are competitive in terms of quality and price characteristics, enjoy a steady, growing demand from buyers, both in the country and abroad. abroad. Today, the export of agricultural products is $20 billion. The target for the country by 2024 is to increase the export of agricultural products to $45 billion, while the growth of exports should be the result of an increase in the quality of domestic goods, their global competitiveness.
However, modern technologies produced in Russia are not yet widely used in the Russian agro-industrial sector. According to the head of the Ministry of Agriculture Dmitry Patrushev, the modernization of agriculture is designed to create an "export-oriented agro-industrial sector" in the Russian market, the basis of this process will be the federal scientific and technical program for the development of agriculture until 2025. Import substitution in the priority sectors of agriculture, according to Dmitry Patrushev, should first of all be aimed at providing seeds for domestic production. Today, the share of seed potato imports in the national market is 80%, which is explained by the low competitiveness of domestic varieties, as well as the lack of modern infrastructure and material and technical base. The share of hybrid seeds of foreign selection in the country is 98%, and the selection and genetic material of broiler poultry farming is completely imported. A similar situation has developed for a number of other types of products, raw materials and foodstuffs.
Recently, the Ministry of Industry and Trade published data on agricultural machinery for 2017. The results showed that today every second harvester is produced in Russia, while the target indicator of the ministry by 2030 is the production of eight out of ten arable land machines in the domestic market. Today, agriculture remains one of the most dynamically growing sectors of the Russian economy; import substitution in this sector is being implemented at a high pace. One of the most important growth impetuses that ensure the positive dynamics of the competitiveness of Russian companies, along with other support measures, is state subsidies. According to experts, state support allows agricultural enterprises to increase and modernize the fleet of agricultural machinery. At the heart of the record, since the 2000s, growth rates in the production of Russian agricultural machinery are high-tech models of all-wheel drive tractors, grain harvesters, forage harvesters and other equipment, developed and put into mass production with state support, as well as the state program to stimulate demand. During the period 2014-2016, agricultural production increased by 11%, and at the end of 2017, the growth was about 3%. For these purposes, under the subsidy program in 2017, 15.7 billion rubles were allocated and 26.3 thousand units of agricultural machinery were purchased.
Russian agricultural machine builders in 2017 exceeded the production indicator by 21%, that is, by more than 107 billion rubles. Export of products amounted to about 8 billion rubles, which is 14% higher than last year. Over the past year, more than 150 models of new equipment were brought to the market, and 20 investment projects were launched to meet growing domestic demand and further develop product exports. In 2017, the Russian exposition was presented at the world's largest exhibition Agritechnika in Hannover, while the Russian representative office was among the leaders both in terms of the number of companies represented and the range of agricultural machinery produced, and in terms of the number of visitors who visited the stand.
The main task facing the Russian agro-industrial complex today is to provide the country's population with high-quality food products, as well as fruits and berries of its own production in this sector, while imports are in the lead. According to Dmitry Patrushev, since the beginning of the implementation of the state program for the development of the agro-industrial complex in Russia, more than 60 thousand hectares of perennial fruit and berry plantations have been planted, by 2025 more than 100 thousand hectares are planned to be planted. As of the first ten days of October, about 7.5 thousand hectares of orchards have been planted in the country, and the expected volume by the end of the year will be about 15.7 thousand hectares. In annual terms, it is planned to harvest 106 million tons of grain in net weight, which corresponds to the planned indicators of the state program and exceeds the average annual indicator of the ten-year period, which is 99 million tons per year (this volume is sufficient to meet the country's domestic needs, as well as export supplies ). Growth in prices for wheat and barley this year, according to forecasts, may be 21-26.5%. The predicted values of the oilseeds harvest are about 16 million tons, which also exceeds the average values for several years.
The positive dynamics continues in the livestock industry: in January-September 2018, the production of livestock and poultry meat in live weight in farms of all categories amounted to 10.3 million tons, which is 356 thousand tons more than in the previous year. At the end of the year, it is planned that the total volume of production will amount to 15.1 million tons and will exceed the figure for 2017 by 3.6%. Milk production for 9 months of 2018 amounted to 24.7 million, showing a slight increase (0.3%), respectively, the total increase in production in annual terms will be more than 400 thousand tons and amount to 31.6 million tons.
One of the ways to implement the course of import substitution in the field of agriculture can be the integration of the agro-industrial complex of Russia and Belarus. Recently, the Forum of the Regions of Belarus and Russia was held in Mogilev, Belarus. On the sidelines of the Forum, Vladimir Putin and Alexander Lukashenko held a working meeting on the most pressing issues of Belarusian-Russian relations. Despite the disagreements and disputes that arise, Russia and Belarus are moving towards a common goal, working together to promote integration processes in the Eurasian space. The ministries of agriculture of the two countries, in turn, approved the balance of food supplies for the next year. In 2019, Russia plans to increase the supply of meat from Belarus by 11% to 320 thousand tons, dairy products by 2.6% to 3.7 million tons. contracts with Russian partners were signed by the Grodno Meat Processing Plant (500 million rubles), the Dyatlovo Cheese Factory and the Verkhnedvinsk Butter and Cheese Plant (300 million rubles each)
Statistical data indicate that in recent years the Russian agro-industrial complex has undergone qualitative changes - from the prevailing predominance of imports to the realization of its own export potential, and for some thresholds they exceed the indicators of the current Food Security Doctrine. In 2017, the export of Russian agribusiness products amounted to $21.6 billion, which exceeded the planned figures, but this result was obtained mainly due to record grain crops. To implement the state program, the Ministry of Agriculture of Russia has developed a passport for the national project "International Cooperation and Export" in terms of exports of agricultural products. The document includes 4 main areas: increasing the production and processing of agricultural products for export, building an effective export-oriented agro-logistic infrastructure, removing tariff and non-tariff restrictions in key export markets and creating a system for promoting agricultural products in foreign markets. For the period 2019–2024 the volume of financing to support the export of products is planned in the amount of 350 billion rubles. A list of priority sub-sectors of agriculture with the greatest export potential has been identified: these are grain, oil and fat, meat and dairy products, fish and seafood, food and processing industry products, including confectionery.
Three years ago, on August 6, 2014, Russia introduced retaliatory measures against sanctions that limited the import into Russia of certain types of food from the countries of the European Union, as well as from the United States, Australia, Canada and Norway. The ban includes the supply of beef, pork, poultry, fish, seafood, cheese, milk, fruits, vegetables and a number of other agricultural products and foodstuffs.
For 3 years, a number of agricultural sectors ensured the growth of domestic production and replaced imported products. “Domestic agricultural producers received carte blanche after restricting the access of imported products to our market. This opened a window of opportunity for the industry. The market does not tolerate emptiness, so the place of importers was taken by domestic agricultural producers. Domestic food products began to dominate on the Russian shelf, while the supply of imported food decreased by almost 2 times in 3 years: from $43 billion to $25 billion in 2016.”- said the Minister of Agriculture Alexander Tkachev.
The growth of agricultural production reached 11% over 3 years due to the implementation of a set of measures in the field of import substitution.
To help the agro-industrial complex fill the food markets with domestic products as quickly as possible, the Government of the Russian Federation increased state support for the agro-industrial complex and improved a number of support tools.
Support for the industry from the federal budget increased by 27%: from 190 billion rubles. in 2014 to 242 billion rubles. in 2017.
Starting from 2015, the state reimburses from 20% to 35% of the costs for the construction and (or) modernization of dairy and greenhouse complexes, vegetable and potato storage facilities, fruit storage facilities, wholesale distribution, selection and seed production and selection and genetic centers.
In 2017, the amount of compensation for capital costs in the construction of dairy farms was increased from 20% to 35%. The period of construction of dairy complexes has increased from 2 to 3 years. Also, the share of compensation for projects in the Far East has been increased to 35%.
For the regions of the Far East, the Non-Black Earth Region and the Republic of Crimea, multiplying coefficients of 1.2 have been established for subsidies aimed at increasing the productivity of dairy cattle in order to accelerate the development of the dairy industry in these territories.
In order to develop horticulture and increase fruit harvest in 2015, the Ministry of Agriculture of Russia more than 5 times increased the amount of state support to reimburse part of the costs of agricultural producers for laying and caring for perennial fruit and berry plantations (up to 2.5 billion rubles), which made it possible for just 1 increase the rate of planting orchards by 1.5 times a year (annually, the area of orchard planting in Russia as a whole exceeds 14,000 hectares of orchards, of which about 10,000 hectares are of intensive type).
In 2016, the Ministry of Agriculture of Russia consolidated a number of areas of support, introduced a single regional subsidy, which allows regions to independently determine priorities in supporting various industries, taking into account regional specifics.
A new mechanism for concessional lending in the agricultural sector at a rate of no more than 5% has been created. The “one-stop shop” principle has been implemented, which allows an agricultural producer or farmer to apply for a soft loan to an authorized bank and not divert working capital to service loans at a commercial rate in anticipation of receiving compensation from the budget. In order to prioritize the development of farming, each region has set the share of subsidies allocated for preferential short-term lending to small businesses.
Increased grant support for farmers, small businesses and agricultural cooperation. Since 2017, the amount of the grant for farmers engaged in meat and dairy cattle breeding has been increased from 1.5 million to 3 million rubles, and for family livestock farms - from 21.6 million to 30 million rubles. Since 2015, grant support has been provided to agricultural cooperatives; in 2017, 846 million rubles were allocated for these purposes. from the federal budget, which is 2.5 times more than in 2015.
The government has also identified as a priority the development of agricultural land reclamation in order to increase crop yields. In 2017, federal support for the melioration development program increased by 1.5 times (to RUB 11.3 billion) compared to 2016.
All these measures taken together made it possible to launch import substitution processes in the industry: the most significant results have been achieved in the meat industry. The share of imports in pork consumption decreased by 3 times (from 26% in 2013 to 8% in 2016), and poultry meat - by 2.5 times (from 12% in 2013 to 5% in 2016).
The import of imported vegetables decreased by 2 times (from 866 thousand tons in 2013 to 463 thousand tons in 2016), while the collection of domestic vegetables increases every year. Over the past 3 years, the production of greenhouse vegetables has increased by 30%.
According to forecasts in 2017, despite adverse weather conditions (frosts, showers, hail, flooding), the harvest of vegetables and fruits will remain at the level of last year (in 2016 vegetables - 16.3 million tons, fruits and berries - 3.9 million tons) thanks to the construction of new greenhouse complexes and the entry into fruiting of new gardens.
In animal husbandry, an increase in the production of livestock and poultry for slaughter is forecasted by about 3% (14.4 million tons), milk - up to 1% (31 million tons).
Successes in saturating the domestic market have set a new task for the Russian agro-industrial complex - to develop the export of domestic products.
Over the past 10 years, agricultural exports have grown 3.5 times from $4.8 billion in 2006 to $17.1 billion in 2016. This year, agricultural exports grew by 17% and exceeded $7.4 billion in 5 months. There is an increase in the supply of wheat, vegetable oils, sugar, pork, poultry meat and frozen fish.
"Russia can trade not only in oil, but also become the world's leading agrarian power, this opens up great opportunities for the dynamic development of the economy as a whole"- says Alexander Tkachev.
To stimulate exports, the Ministry of Agriculture of Russia, within the framework of the direction of the strategic development of the Russian Federation "International cooperation and export", developed a priority project "Export of agricultural products". Exporters of agricultural products will receive support for lending programs, consulting support, assistance in positioning at foreign exhibitions and promoting popular Russian products abroad (Vologda butter, Adyghe cheese, Kamchatka crab, Tambov ham, Bryansk beef, etc.). Export programs are being developed for small businesses and export agricultural cooperatives.
Additional equipment of the laboratories of the Rosselkhoznadzor is envisaged to simplify the work on fulfilling the phytosanitary and veterinary requirements of importing countries, as well as an increase in the number of foreign inspections of Russian agricultural enterprises for their accreditation for export deliveries and expanding the access of agricultural products to foreign markets.
In addition, the Center for Analysis of Exports of Agro-Industrial Products has been established under the Ministry of Agriculture of Russia, which is tasked with conducting analytical studies of foreign markets, determining priority areas and creating a unified information system to support agricultural exports.
The implementation of the priority project will increase the supply of agricultural products to foreign markets by 27% to $21 billion by 2020.
Import substitution started in Russia on August 06, 2014 and turned out to be very useful for the Russian producer of the agricultural industry. The Ministry of Agriculture has calculated the effect of import substitution, accumulated over 3 years. Achievements in the rural sector and other sectors will be clearly demonstrated on September 12-14, 2017 at the international exhibition Import Substitution, which will be held at the Crocus Expo in Moscow.
Three years ago, as a response to Western sanctions against Russian companies and officials, our country imposed restrictions on food supplies from these countries. The restrictions included cattle meat, fish processing, cheeses, poultry products and fruit and vegetable farms. Food imports to Russia then amounted to $43 billion a year.
This was an excellent protectionist measure that cleared the way to the consumer for Russian producers. In agriculture, imports fell to $25 billion in 2016 (by 42%), while the growth of agricultural production in the country amounted to 11% over the period.
Import substitution in agriculture was supported by additional injections of money from the state budget. In 2017, the amount of state support exceeds 242 billion rubles (+27% compared to 2014), in particular:
- 20-35% of the costs for the re-equipment or construction of dairy farms, fruit and vegetable complexes, greenhouses, warehouses and breeding centers are reimbursed;
- You can receive compensation up to 35% when investing in agriculture in the Far East;
- Subsidies to increase the productivity of dairy production in the Far East, the Non-Black Earth Region and the Crimea increased by 20% (a multiplying factor of 1.2 was introduced);
- Costs for fruit and berry orchards are reimbursed (up to 2.5 billion rubles)
- You can get a loan at a rate of up to 5%, where the share of subsidies for small farms is determined by the region;
- A grant for opening a farm and agricultural cooperatives can be up to 3-30 million rubles, depending on the scale of the farm;
- Exporters can take advantage of the priority project "Export of agricultural products": preferential loans, consultations, participation in foreign exhibitions.
In agriculture, the best way to replace imports was in sales of pork and poultry, where the consumption of overseas meat decreased by 3 and 2.5 times, respectively. Imports of vegetables fell by half. Minister of Agriculture of Russia A.N. Tkachev said: “In order to maintain the momentum received for development, it is important not to reduce the volume of state support in the future. This is the main incentive for investment in the agricultural sector.”
The import substitution program in Russia sets the task for Russian manufacturers to create such high-quality products that would not only replace imports, but also be attractive abroad and increase Russian exports. In other words, Russian goods and services must become competitive on the world stage.
The export of Russian agricultural products abroad in 2016 increased to $17 billion, in January-May 2017 it grew by 17% more compared to the same period in 2016. “Russia can trade not only in oil, but also become the world's leading agrarian power, this opens up great opportunities for the dynamic development of the economy as a whole,” the Minister expressed his hopes for export growth. By 2020, the export of agricultural products should amount to $21 billion / year.
In 2017, the Import Substitution exposition will present products of domestic manufacturers in such areas as the agro-industrial complex (AIC), mechanical engineering, the oil and gas sector, and consumer goods. They will be represented by both the producers themselves and the regions in which they produce it. They will be joined by officials responsible for creating an environment in which import substitution can be implemented without bureaucratic barriers.
Sources: , Ministry of agriculture
The agricultural sector shows a convincing growth
Today, agriculture is one of the locomotives of the Russian economy. In the crisis year of 2015, the industry was almost the only one that showed growth - plus 2.9%. The agrarians will probably end this year in the black as well. The policy of import substitution, government support and an incentive in the form of a food embargo gave rural producers every chance of success. Results on the tables of Russians: domestically produced products, sometimes cheaper and of higher quality, now dominate the consumer basket. Elena TYURINA, director of the Agricultural Marketing Institute, spoke about the achievements of agriculture as part of the import substitution policy of MK.
- In October, two years have passed since the import substitution program in agriculture was approved. What results have been achieved during this period?
The most important achievement is a decrease in the share of imports, an increase in production and the level of competition between Russian agricultural producers, and as a result, a slowdown in the rise in prices for basic domestic food products. Case in point: the rise in pork and poultry production has ensured a healthy level of competition among Russian producers, driving prices down for these products. Also among the positive results of import substitution is a decrease in the dependence of the Russian food market on the situation on the foreign exchange market. Previously, with a high share of imports, any fluctuations in the exchange rate led to a rise in the price of products. Now the main factor in the formation of prices in the market is the volume of production, and its increase leads to the fact that the rate of price growth is reduced.
Since 2010, the Food Security Doctrine has been in force in Russia. According to the document, our country should be 80-95% self-sufficient in the main products of domestic production, and the share of imports should be minimal. At present, the domestic market can boast of achieving such indicators?
Over the past six years, a lot has already been done to achieve the norms envisaged by the doctrine. At present, Russia provides itself with grain by 95%. Sugar produced in Russia - both raw and beet - accounts for 85% of total consumption, with a steady increase in investment in this sector. As for vegetable oil, here we are also fulfilling the indicators of the doctrine, providing ourselves with 80% of the product of local production and importing only olive oil. The meat complex can also boast of success, although the situation differs by market segments. For example, the share of pork imports is about 10%, poultry - about 7%. Compared to last year, pork imports decreased by about 10%, and poultry supplies - by 12%. At the same time, pork and broiler occupy the first and second places in our rating in terms of investment volume: they account for 16% and 13% of all cash injections into the agro-industrial complex. But beef is still imported from abroad: the share of imports is about 20%. At the same time, there is an increase in production in this segment, although the long period of implementation of beef cattle breeding projects does not yet allow us to abandon imports. However, there is every reason to believe that in the short term the share of imports will decrease to 15%.
In the production of vegetables, the situation is also ambiguous. For example, greenhouse vegetables (tomatoes, cucumbers) were included in the doctrine in 2015 with a provision of 90%, although they account for 6% of investment in the agro-industrial complex over the past 5 years. In the last three years, as a result of the implementation of state support measures for vegetable production projects (in the form of compensation for direct construction costs and subsidies), we have seen an increase in production volumes. In addition, the embargo on imports of greenhouse vegetables from the EU and Turkey became an incentive for investment growth, which reduced the investor's risks when making a financing decision. The implementation of these projects allows us to predict a significant reduction in the share of imports. Pay attention to the counters in the stores: they are Russian-made cucumbers. Previously, in the winter period, 90–95% of cucumbers were imported from other countries, this year this figure has decreased to 60%, and in two years, according to forecasts, the share of imports will decrease to 20–25%.
But such a traditional Russian product as potatoes, especially in winter, is often imported in stores. Is there any change in this market?
Our problem is not to grow potatoes, but to preserve them. According to the doctrine, the level of provision of the domestic market with potatoes should be 95%. However, in the segment of potato growing, the seasonal factor is of great importance. Indeed, in winter, residents of large cities mainly consume imported potatoes, but the volume of its purchases is gradually decreasing. If last year about 400–500 tons of potatoes (80% of all retail products) were imported during the winter period, then by the end of this year, we can expect a reduction in imports to 40% and a further decrease to 20%. It was possible to increase the pace thanks to active investment in the production of potatoes and vegetables of the “borscht set” and the implementation of vegetable storage projects. Modern vegetable stores allow storing products from October to May, that is, with their launch, we are gradually solving the problem of storage. We estimate the share of investments in the production of open field vegetables at 1.7% of the total financing of the agro-industrial complex over the past 5 years. The figure is small, but significant given the lower costs per unit of storage and unit of production.
Let's talk about dairy. According to the Minister of Agriculture Alexander Tkachev, this segment lags behind in development compared to other markets. What is it connected with?
Yes, the dairy complex has been the least successful in achieving the indicators of the Food Security Doctrine, despite the significant amount of investment in the sector. According to our ratings, the dairy complex ranks third (after poultry and pork) in terms of investments, it accounts for 9% of funding for projects in the agro-industrial complex. But unlike the first two industries, investments in milk have not yet given the proper return, although there is an increase in production for some types of products, such as cheese. According to the results of the current year, cheese production increased by 1.8% - growth was recorded for the first time, while imports amounted to about 20%, which is much less than in previous years. The incentive for the development of cheese production was the food embargo. Moreover, not only large enterprises, but also farms began to increase production. However, another problem has arisen: in a crisis and falling incomes, consumer demand switches to cheaper products, so cheeses produced by farmers are inaccessible to the main part of the population due to their high cost. There is also a conflict of interest between producers of raw milk and finished products, and there is a low level of integration: raw milk is produced by agricultural producers, and finished products are processed by processing enterprises. At the same time, the share of foreign producers in Russia is large: most often they do not invest in raw milk production and, moreover, are interested in lowering purchase prices, which reduces the profitability of raw milk production. But in the last 4-5 years the situation has changed. There are a number of projects that provide for a high level of integration, thanks to which, after reaching the planned capacities and creating integrated complexes, we will be able to achieve the indicators of the doctrine. But, probably, it will happen not earlier than in 5 years.
How does Russia deal with those products for which we have a surplus? Are export options being used?
Yes, for example, this year our country has become the largest grain exporter in the world. We are also starting to export pork and poultry to other countries, although so far in small volumes. At the moment, about 10 thousand tons of pork have been exported from Russia for sale. This is a good result, given that we used to import pork ourselves - 400-500 thousand tons per year. In addition, the Russian Federation is a major exporter of seeds, from which vegetable oil is made.
The development of agriculture is one of the priorities of the state policy; annually, within the framework of various state programs, serious funds are allocated to finance the agro-industrial complex. What tools are most effective to support farmers?
The main measure is subsidizing agricultural loans and reducing the interest rate on loans for agricultural producers. The second important measure is to compensate them for the capital costs of construction. The support tool is also actively used in the form of subsidies for 1 kg of milk to producers and 1 ha of cultivated area in the production of grain and crops. But in addition to financial support, the market factor has a positive impact on the development of the agro-industrial complex: after the introduction of counter-sanctions, the attractiveness of the agricultural complex for investors has increased, which has become an additional incentive for the development of domestic agriculture. At the same time, the current crisis has increased the risks of investors, and such factors as the decline in incomes of the population, the reduction in consumption, made them look at the market more cautiously. Changing the diet of citizens in favor of saving on food has also set its priorities. For example, Russians began to replace vegetables, primarily greenhouse vegetables, with cereals or cheaper outdoor vegetables (potatoes, carrots, beets), reduced the consumption of fresh herbs, and instead of expensive beef, they began to choose poultry meat as a source of protein. The investor takes into account all these fluctuations, but understands that the crisis will not last forever.
- Should farmers wait for changes in the conditions of state support for the industry in the foreseeable future?
Yes, some changes may follow. It is planned to combine the directions that will be supported into single categories. The measure is controversial, as there are fears that in this case it will be difficult for investors and government agencies to assess the distribution of funding by industry and predict the market situation. The second change in the conditions of state support is the transfer of powers to finance the agro-industrial complex to the regions. Previously, information was received from the regions to the Ministry of Agriculture, it was studied by the commission for the selection of projects and the commission for the evaluation of regional development programs, after which a decision was made on the distribution of funds and their implementation. This innovation is also difficult to evaluate, I believe that all projects should be consolidated in the federal center, and the indicators for the regions should be generalized into an all-Russian indicator. Financing planning, especially in terms of the distribution of investments by sectors and forms of support, should still be carried out centrally. These elements of a planned economy will allow us to control growth rates, otherwise industries and regions may develop chaotically and unregulated. In general, we expect that by 2018 the situation will begin to change, and the demand of the population, as the main factor taken into account in the development of agricultural projects, will increase.
- Which regions can be called leaders in the agricultural industry, and which, on the contrary, are lagging behind?
The problem is that not all regions have equal access to loans, so there is a conflict of interest between the distribution of funding and the orientation of the regions to meet their own needs with locally produced products. And the key to the success of the region in agriculture is a large number of investment projects. The top ten in attracting investments are Belgorod, Tambov regions, Tatarstan, Voronezh, Kursk, Bryansk, Lipetsk, Rostov regions, Krasnodar Territory and Chelyabinsk region. From 2010 to 2015, these ten regions in total received 60% of the total investment in the agro-industrial complex. In many respects, the success of the region in agriculture depends on the competencies of the head of the subject: if he is business-oriented, provides benefits to investors, then this will bear fruit. However, with this disproportionate funding, some regions experience a surplus while others remain in short supply, pushing up food prices: costs are driven up by the logistics of shipping from surplus regions. At the same time, the proportional development of production by regions is an important factor in stable prices in the region.
Has the agricultural business managed to take advantage of the preferences that it received as a result of the import substitution program?
You need to understand that agricultural producers are divided into several categories: agricultural holdings, medium-sized enterprises and farms. Vertically integrated holdings are in the most advantageous position: recently they have been growing, increasing production, and actively acquiring agricultural land. In addition, the holdings follow the path of creating full-cycle production facilities, which allows companies not to be jealous of market conditions. Large enterprises themselves regulate the amount of space used, the range of products, build household chains up to the creation of their own stores and retail outlets. At the same time, holdings find themselves in more favorable conditions when obtaining loans and subsidies for the implementation of their projects, thus having a stable competitive advantage. Leading agricultural holdings are expanding the geography of production and can operate under their brand in different regions. In addition, they have more opportunities to promote their products. In such conditions, it is, of course, more difficult for smaller market participants to work. Therefore, recently there has been a trend towards mergers and acquisitions of small, albeit successful, manufacturers.
A recent World Bank report says that import substitution and agricultural development programs have slowed down consumer inflation, reducing the country's poverty rate by 0.5%. Is this a random result or can we talk about a positive trend?
This is the result of growth in Russian food production and increased competition between producers, which led to price stabilization and even price reduction for certain product categories. Here the market law of the correlation of supply and demand played a role. We are developing an understanding that the industry pays for not only domestic demand, but also exports. If support measures are not reduced, production will grow.
Recently, the term "import substitution" is no longer used as actively as it was last year and the year before. Maybe almost complete independence from imports has become the norm and there is no need to “replace” anything anymore?
Yes, import substitution is no longer so relevant, this term is “out of fashion”. The projects have already been launched, the market is visible for the future, and even if the sanctions are lifted and imports return, the demand for it will not be as great as before. The consumer will make a choice in favor of domestic producers. Prior to the launch of investment programs in the food industry in 2005, imports accounted for more than 60%, 1-2 million tons of food was imported into Russia. 10 years have passed, and now no one needs already frozen imported products, we have everything of our own - fresh, high-quality and cheaper.
Import substitution in official quotes
Vladimir Putin, President of the Russian Federation:
“Ten years ago, we imported almost half of our food products from abroad, we were critically dependent on imports, now Russia is among the exporters. Last year, Russian agricultural exports amounted to almost $20 billion. This is a quarter more than the proceeds from the sale of arms, or about a third of the income from gas exports. And our agriculture has made such a breakthrough in a short but fruitful period. By 2020, it is necessary to fully provide the domestic market with domestic food. We can not only feed ourselves, taking into account our land, water, which is especially important, resources. Russia is capable of becoming the world's largest supplier of healthy, environmentally friendly, high-quality food products, which have long disappeared from some Western producers, especially since the demand for such products on the global market is growing steadily.”
03.12.2015
Dmitry MEDVEDEV, Prime Minister of the Russian Federation:
“People see that import substitution really brings results. There are much more high-quality domestic products in stores, which are more affordable than imported ones. Of course, this work will need to be continued. Our task and goal is not to lower the achieved level and move on. And not only because we began to earn money on investments in the agricultural sector, and it began to move the entire economy, but also because successes in agriculture promote the development of related industries, such as engineering and the chemical industry. In addition, the government is not going to give up measures of state support for the agro-industrial complex.”
06.09.2016
Arkady DVORKOVICH, Deputy Prime Minister of the Russian Federation:
“Today we see that 90–95% of the key positions in the range of food products on the shelves of our stores are occupied by Russian goods. Agriculture is the only sector of the economy that has been growing steadily over the past few years. The locomotive of our growth is a fact. This is not just a driver of growth, it is an industry that sets the tone and mood. Products are what people face every day, they want to see high-quality and affordable products on the shelves, and Russian-made products.”
15.11.2016
Alexander TKACHEV, Minister of Agriculture of the Russian Federation:
“Today Russia is fully self-sufficient in grain, butter, sugar and potatoes. For the first time in many years, we have managed to reach and even exceed the threshold of the Meat Food Security Doctrine. The share of domestic meat products in total resources reached 89%. The introduction of counter-sanctions and a food embargo led to the allocation of priorities in the state program for the development of agriculture and an increase in state support for the industry, which, as a result, intensified the processes of import substitution. At the same time, more than half of the “dropped out” import volumes were replaced by supplies from other countries that were not banned.”
11.02.1016
Anna POPOVA, head of Rospotrebnadzor:
“People who go to the store for food and not for the brand did not notice much change. During this period, Russia fed itself. Obviously, the sanctions first of all removed the high-price segment from the shelves, because, as a rule, we produce simple and cheap products ourselves. A balanced diet that provides adequate amounts of proteins, fats, carbohydrates, and micronutrients is not provided by high-priced elite foods. Imports are going away and we are seeing more non-compliant samples in imports. At the same time, we see a reduction in products containing genetically modified organisms (GMOs)."