Farming in RussiaAgriculture is turning from one the worst economic problems of the old Soviet Union to one of the greatest success stories of modern Russia.
Just after Russia's liberation from the Soviet Union, the absence of a good legal framework for land ownership, lack of credit and the poor physical distribution systems for food, led to a collapse in agriculture. As a result, Russia became the world's biggest meat importer, and up to 60% of Russian consumption is now imported. However, with the economic revival under Vladimir Putin, Russian farming, food processing and distribution has shown substantial improvements in quality and quantity of output, and competitiveness in price. Large profits are now being made in the sector, and there is substantial investment taking place. |
There are many large, modern and well-run agricultural enterprises that are rapidly expanding. Yet, the lack of a good legal framework for land ownership still holds back the development of former collective farms, leaving large parts of the Russian countryside unused. Food processing, particularly meat processing, is now being subsidised. In 2013, the Russian Federal Government started offering subsidies for constructing new slaughterhouses and upgrading older ones. Russia still lacks good quality distribution centres and a secure cold chain delivery system, but agricultural regions have good rail links with both India and China. The demand for investment in Russian agriculture is high, and the size of the country, makes the demand even greater. |
Animal husbandry
|
Livestock farming suffered with the collapse of the Soviet Union, and pork and chicken production were particularly affected. Industrial scale production ceased and output was cut by 75%. The Soviet Union's successful pig genetics programme was largely destroyed and although dairy production continued, output was greatly reduced. Beef farming in Russia is modest and lamb is widely available, but it is expensive and there is no demand.
Russia revived the poultry industry through subsidising the interest on bank loans for new units and encouraging processors to develop a supply chain direct to the consumer, as foreign supplies were subject to customs duties. They then used this successful model to increase pork production. With government subsidies and a measure of protection against foreign imports since 2006, there has been a surge in the construction of new pig units and by 2011 750 new units were in production. In 2013, the government also introduced a subsidy for the processing industry. However, in 2012 Russia joined the WTO and they now have to comply with restrictions on subsidisation. Despite the surge in new industrial scale units, Russian pork production has fallen. Many inefficient back yard producers are reducing or ceasing production because of social factors, bouts of disease and high grain prices, and alternative full-time employment is becoming more attractive. As a result, the opportunity in the market is great and it continues to grow with the increasing demand, as back yard producers decline. Russia continues to be the world's largest importer of meat. |
Russia has a sustainable supply of barley, wheat and soya bean pig feed. It is one of the world's low cost producers of barley, wheat production is good and soya beans are native to eastern Russian. In the wetter parts of the Black Earth region, soya bean production is rising quickly. With some of the world's lowest cost arable production and short transport routes, Russia has the ideal foundations for a productive future in meat production.
When wheat prices doubled between the 2012 and 2013 harvest, the smaller pig farmers without their own grains stores, started killing off their stock early, causing a sharp drop in prices from the customary 95 Roubles a kilogram to 65 Roubles a kilogram. This was presented to the government as a fault of WTO membership. Western Europe faced similar difficulties the previous year, which resulted in higher prices for the surviving farms. The Russian pig farming industry has world class buildings and equipment, but leading genetics is bought as the production of genetic material for pigs is still underdeveloped. The explosion in big, modern facilities has stretched management talent and as most of the farms were conceived by planners rather than pig farming specialists, Russia are lacking a commitment to good husbandry. Foreign investors with better operations management of breeding facilities and a greater commitment to feeding regimes, aimed at quality output rather than fodder economy, have a competitive advantage. Russia lacks the mills needed to produce weaner fodder and this is generally still imported, so the ability to mix your own feed is advantageous. |
WHAT WE CAN DO FOR YOU
Volga Trader is familiar with Russian Food Distribution. We can use Russian customs data to identify sanctioned importers of a particular foodstuff and target your offer on those importers so you get quickly to the buyer.
YOUR PREPARATION
Russia has stringent Sanitary and Phytosanitary regulations. You will have to have your products certified to Russian standards. You will also have to be prepared to deliver on DAP terms. Russian importers buying from the EU are used to the goods being delivered by a lorry straight to their warehouse.
Volga Trader is familiar with Russian Food Distribution. We can use Russian customs data to identify sanctioned importers of a particular foodstuff and target your offer on those importers so you get quickly to the buyer.
YOUR PREPARATION
Russia has stringent Sanitary and Phytosanitary regulations. You will have to have your products certified to Russian standards. You will also have to be prepared to deliver on DAP terms. Russian importers buying from the EU are used to the goods being delivered by a lorry straight to their warehouse.