Russian Agriculture Growth: Can Russia feed the world?
The Russian economy is now growing again. The Economy Ministry expects GDP growth in excess of 2% this year as Russia pulls out of a three-year recession.
Agriculture bucks recession trend. Agriculture was the only major sector showing growth in the recession of 2014-17, with output growing 3.5% in 2015 and 4.8% in 2016, according to official figures. Growth in the sector of 4.5% is expected in 2017.
Key government policies – a perfect storm. Localization, counter-sanctions, ruble free-float, food security, subsidies and an “added-value in Russia” approach are all helping food production to hit record levels in several sectors.
All according to plan. A strategic agricultural development plan was adopted in 2012 and is having a noticeable effect, with many targets reached ahead of schedule. Food self-sufficiency is a key element of national security.
Record production in many sectors. Grain production hit a new record in 2017, with harvest figures now revised upwards to nearly 130 million tonnes. Some sectors, such as poultry, now suffer from over-production.
And this helps inflation. Food items form over 40% of the CPI basket in Russia. Greater production and competition is sharply reducing food price inflation, which impacts the CPI.
Food imports slump …Russia was one of the world’s biggest food importers – over US$40 billion annually, which was over 30% of total consumption. But, in 2016, with a weaker ruble and counter-sanctions, food imports fell to around US$25 billion.
Agricultural exports were up 17% YoY in the first six months of 2017.
From guns to butter. Russia now earns more money from the export of food products than from military equipment. Latest estimates suggest US$20 billion of food exports in 2017.
Investment opportunities widening. Considerable areas of food production have been modernized in recent years, using Western equipment. Competition in some food sectors is now reducing profits and well-equipped producers can be bought more cheaply.
Politics no barrier to investment. The Russian government makes a sharp distinction between politics and economics and has repeatedly stressed that foreign investment is welcome in Russia.