Russia’s Grain May Soon Bring in More Gold Than Oil

Russia’s Grain May Soon Bring in More Gold Than Oil

RUSSIA 13:53 23.09.2016

Amid a record-setting harvest, Russia’s agricultural sector is giving the Russian economy a powerful and much-needed boost; according to some observers, the sector even has the potential to gradually wean the country off its dependence on the export of hydrocarbons.

Earlier this month, the UN’s Food and Agriculture Organization projected a record grain harvest for Russia, with the US Department of Agriculture following suit, saying that Russian grain exports now exceed those of the US.

This year, the country is expected to produce about 64 million metric tons of wheat, with the total grain harvest expected to reach between 113 and 116 million tons. This would mean exceeding contemporary Russia’s previous record – set in 2008 when farmers produced 108.2 million tons of grain. About 40 million tons from this year’s harvest is expected to be exported, up from the 32 million tons exported last year.

Amid the bumper crop bonanza, which is becoming a regular occurrence as the Russian agro-industrial complex takes advantage of sanctions on European food products, some officials are beginning to suggest that agriculture may soon turn into a major tool helping to ease the country’s dependence on oil and gas exports as a percentage of its exports earnings. 

Earlier this month, analysts calculated that Russia’s agriculture had already surpassed arms trade as a percentage of the country’s exports. Moreover, Minister of Agriculture Alexander Tkachev anticipated that by 2030, the grain harvest could reach 130 million tons annually.

Combine harvester works the fields in southern Russia's Krasnodar Territory

Sputnik/ Vitaliy Timkiv
Combine harvester works the fields in southern Russia’s Krasnodar Territory

On Thursday, former Moscow Mayor Yuri Luzhkov, who has become somewhat of an farming connoisseur in his own right since he stepped down from his post in 2010, said that the ostensible rebirth of Russia’s agriculture is great news. The politician emphasized that apart from replacing hydrocarbons with something edible, the resurrection of agriculture has a philosophical importance – for Russians, he noted, farm work “returns us to our origins and identity, borne in the depths of our people, about our land.”

Duma lawmaker Vladimir Kashin emphasized that he too was happy to see the rebirth of agriculture, emphasizing that “the country’s security begins in the village.” Throughout the 1990s, under the guidance of liberal economists including as Yegor Gaidar and Anatoly Chubais, Russian agriculture was consigned to the role of a budgetary ‘black hole’. Now, in the last decade or so, and especially since the beginning of the sanctions war with the EU, that is changing, to the point where Russia has the potential to become an agricultural superpower.

Speaking to the independent online newspaper Svobodnaya Pressa, Elena Turina, general director of the Moscow-based Institute of Agricultural Marketing, emphasized that grain exports are just the beginning. 

“We have become a world leader in grain exports; furthermore, we are coming close to a level where we can take up a leading position as a major exporter of pork and poultry, and after that – of field vegetables. If we put in the necessary effort, we can achieve good results in the export of dairy products as well. In fact, we already have a good export potential, and not just in food products of all sorts, but in feedstock as well.”

Farmer Oleg Sirota rearranges cheese blocks in the cheese ripening room at Russian Parmesan cheese dairy is Moscow Region's Istrinsky district

Sputnik/ Anton Denisov
Farmer Oleg Sirota rearranges cheese blocks in the cheese ripening room at Russian Parmesan cheese dairy is Moscow Region’s Istrinsky district

According to Turina, the import-substitution programs introduced in 2015, which made use of state financial support, benefitted Russian farmers significantly. The programs, she noted, “provided the Russian agro-industrial complex with serious momentum…Moreover, special attention was paid specifically to those segments previously filled with imports; 2015-2016 saw a 15% increase in the production of fruits and vegetables – specifically from the list of items which had been imported from abroad prior to these measures.”

According to the expert, Russian agriculture’s “main resource is farmland itself, which, unfortunately still isn’t being used to its fullest potential. A great deal of hope has been placed in the new technologies now being introduced, which will generate greater profitability for producers, while increasing output as well.”

Noting that it’s difficult to say whether agriculture could really come to compete with the oil industry in terms of export earnings, Turina noted that “in any case, sooner or later, we will have to move away from this dependence on raw materials – to get off the ‘needle’ so to speak. The situation in the oil market, according to most experts’ forecasts, will remain complex for a very long time. An average price of $45-47 per barrel means an obvious lack of revenues from exports, and points to the need to find other sources of income.”

In any case, even if Russia cannot rely on agricultural exports outstripping the earnings brought in by hydrocarbons, at least in the short term it can, at the very least, count on food security.

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