; Connecting Agricultural Community for Better Farming; Pakistan's Largest Agri Web Portal

Connecting Agri-Community for Better Farming


Search from the largest Agri Info Bank


Pakissan Urdu



  Bookmark and Share;

News Channel
Russian agriculture sector flourishes amid sanctions
Wednesday, April-19-2017

When the EU and US imposed sanctions on parts of Russia’s economy following military intervention in Ukraine 2014, some local officials portrayed the blockade as an opportunity. Together with a falling rouble, they said, it would boost development of domestic business by encouraging import substitution and making exports more competitive.

Many western analysts and investors were cynical. But in at least one area of the economy — agriculture and associated sectors — the optimism has been vindicated. Russia last year became the world’s biggest exporter of grains, at more than 34m tonnes. Total Russian grain production hit a record 119m tonnes. The turnround is striking since as recently as 15 years ago — and for a couple of decades before during the Soviet era — Russia was a net importer.

The success goes beyond grain. Russia has fully substituted imports with domestic production of pork and chicken. It has become a top producer of sugar beet; greenhouse vegetable production last year was up 30 per cent on the year before. While agriculture remains far below oil and gas, the sector has overtaken arms sales to become Russia’s second-biggest exporter. In reality, western sanctions had little to do with this.

The weaker rouble that helped boost exports and make imports more expensive was a function, above all, of falling oil prices. The sanctions that helped boost import substitution were imposed by Russia — a supposedly “retaliatory” ban on many western foodstuffs. That ban arguably hit Russian consumers harder, by depriving them of favourite imported foods such as French cheese and fuelling inflation, than it did many of the exporting countries.

Some analysts suggested president Vladimir Putin was using the sanctions as cover to advance a strategic objective he had already set: making Russia increasingly self-sufficient in food. The Russian government also increased subsidies to farmers. The sector has benefited, too, from a move in the past decade to allow private land sales — although land prices, by world standards, remain low. All these developments are at last helping Russia take advantage of some natural attributes.

The highly fertile “black earth” region in central and southern Russia is close to Black Sea export terminals well placed to supply big north African and Middle Eastern wheat importers such as Turkey and Egypt. Andrey Guriev, chief executive of PhosAgro, the London-listed phosphate fertiliser producer, says the rouble devaluation created a “fantastic pricing environment for anything agriculture can produce”. Add in falling fertiliser and fuel prices, and “in one day, the Russian agricultural sector became as profitable as hell”.

Related article Debut for Black Sea wheat derivatives contract Traders in key grains region have a new hedging and investment tool Globally, a weak agricultural commodities market has hit demand and prices for fertilisers at the same time as new capacity is coming online. But PhosAgro and other Russian fertiliser companies are benefiting from the domestic agriculture boom, with Russian consumption of crop chemicals up 16 per cent last year, against global growth of 2.2 per cent, according to preliminary data from the International Fertilizer Association. There are relatively few large quoted Russian agriculture companies.

But since March 2014, when sanctions were imposed, shares in Cherkizovo, the meat processor, have jumped 63 per cent, well above the 45 per cent increase in the rouble-denominated Micex index. PhosAgro’s shares have risen 85 per cent in rouble terms in that period, and shares of Acron, another mineral fertiliser producer, have tripled. Growth in

Russian agriculture and linked sectors could potentially continue to be strong as rising profits allow farm groups to invest in technology and more fertilisers to improve sub-par productivity. The most exciting opportunity lies in Asia, where Russia has a band of fertile land along its border with China. There, the soil and climate — on a similar latitude to the big grain-growing areas of the US — is good for soyabean cultivation. With food exports to China still in their infancy, developing that sector could take years, or even decades.

Even without it, however, Russia’s agriculture boom shows that, despite sanctions and the poor state of east-west relations, there are pockets of value and opportunity to be found in the Russian market.

Courtesy Financial Times

Main Page | News  | Global News  |  Issues/Analysis  |  Weather  | Crop/ Water Update  |  Agri Overview   |  Agri Next  |  Special Reports  |  Consultancies
All About   Crops Fertilizer Page  |  Farm Inputs  |  Horticulture  |  Livestock/ Fisheries
Interactive  Pak APIN  | Feed Back  | Links
Site Info  
Search | Ads | Pakissan Panel


2001 - 2017 All Rights Reserved.