From 2001 when he came to power, Vladimir Putin explained his intention to restore Russian agriculture and put in place agricultural policies oriented towards the market: the land was partially liberalized, large “agro-holdings” were established and to develop the sector the Russian authorities decided to support prices by establishing tariff barriers at market entry.
Since 2014, the Ukrainian crisis at the origin of the embargo on European imports has reinforced this Russian ambition for its agriculture. Between 2013 and 2020, the Kremlin budgeted € 52.5 billion for its agricultural policy, by supporting the modernization of agricultural equipment and technical means necessary to increase production, but also more generally the development of rural areas. Farmers are thus supported by aid per hectare, milk quality premiums, and aid for meat production.
Since that year, the crisis with the neighboring country and the annexation of Crimea by the Russian armed forces, at the origin of the embargo on European imports, have reinforced this Russian ambition for its agriculture. The Kremlin has budgeted more than 50 billion euros for its agricultural policy, by supporting the modernization of agricultural equipment and the development of new technologies. The result was spectacular: wheat production doubled in just five years.
And it is far from over. “Given the potential allowed by global warming and the ambition carried by the Moscow authorities, it seems certain that Russia will be able to produce in the near future, around 120 Mt of wheat,” said Jean-Jacques Hervé. He added: “Domestic consumption should remain relatively stable”.
In 2017, Russia harvested 84 million tons (Mt) of common wheat, confirming its position as the world’s fourth producer and above all establishing itself as the world’s leading exporter with around 35 Mt shipped around the world. With this new record, Russia thus reconnected with the glorious past of the Soviet era during which the country was “the granary of the planet”.
#Russia has become world's NUMBER 1 exporter of wheat & other agriculture – Putin
— RT (@RT_com) December 19, 2019
The Russian plan to lead the country to a new (agricultural) Revolution
For the former agricultural adviser near the French Embassy in Moscow, Jacques Hervé, the northernmost regions of the country would see their yields increase and land, now fallow, would become productive. Jean-Jacques Hervé is probably your best option if you want to speak about the agriculture of Russia and Ukraine General engineer of bridges, water, and forests, member of the French Academy of Agriculture, for seven years he was an agricultural advisor to the French Embassy in Russia and four years advisor to the Ukrainian government for Agriculture and Food.
This connoisseur of the Black Sea countries was the guest, on December 3, of the Association of Friends of the French Agricultural Academy (4AF) to talk about the consequences of climate change on Russian agriculture.
His analysis is clear: Russia should profit economically from the expected rise in temperatures. Already the world’s leading wheat exporter, global warming coupled with technological progress could transform the country into an agricultural superpower. He explained. “In some areas bordering China, wheat production could double thanks to irrigation and temperature supplement”.
Long neglected, agriculture is now one of Russia’s strategic priorities, which had to develop its production potential after the embargo it decreed in 2014 on European and American products, in reaction to the economic sanctions they imposed. suffered in the context of the Ukrainian crisis. Russia became the leading wheat exporter in 2017, yet it is far from having maximized its production potential. The dynamic could accelerate in the years to come.
The Ukrainian affair represented the opportunity to stimulate its production. The oil income made it possible to invest in companies, in technologies, seeds, production equipment” explained Jean-Jacques Hervé.
“An incredible production potential is being set up around large companies, which invest in the best techniques”, explains Jean-Jacques Hervé. The export balance in corn and wheat in Ukraine, today 40 Mt, will increase to 80 Mt within five years, specifies the specialist. In Russia, the 120 Mt could quickly rise to 150 Mt or even 200 Mt. Jean-Jacques Hervé specifies that domestic consumption will not be able to not increase much in these two countries.
Adapting the strategy to the new world: climate change and organic market
Beyond investing in techniques, climate change could also boost Russian and Ukrainian yields in areas already exploited. In southern and western Siberia, with one or two degrees of temperature more, the gain is a few hundred-degree days. While currently, crops can only be grown from May to the end of August, so there would be the possibility, with global warming, of growing even early corn. “In this area, we will have a significant capacity to increase yields on the land currently available”, estimates Jean-Jacques Hervé.
It is clear that there is a huge global organic market with a turnover of 100 billion, and for sure Russia wants its piece of the pie. An ambition displayed by Vladimir Poutine, who, in December 2015, proclaimed his intention that “Russia will become the world’s leading exporter of organic products “.
“In 2014, we started exporting organic products,” recounts Stanislas Guriev, from Sibbio products. All over the world, demand for organic products is growing. We intend to follow the world train”. In Russia, the demand for organic products is confined to cities where purchasing power is higher.
“With the embargo, we cannot import the organic food products that a certain part of the population asks for, so we will produce them.” It is not only for its internal market that Russia wants to produce organic but above all for export, which is more profitable.
“For example, in France, consumers are more and more attentive to production conditions and are ready to pay more for organic products”, underlines Stepan Shibaev, an international commerce executive in Russia for Bretagne Commerce International.
For the moment, it is in field crops for animal feed, that Russia is testing itself in organic farming with cereals (barley, oats, rye) but also oil-protein crops (rapeseed, peas). Even though organic represents less than 1% of Russian production, part of it is already exported. “Our main consumers are the Netherlands and the United Kingdom,” stresses Stanislas Guriev, “since this year, we are also producing gluten-free oats and soon, we will also be selling organic oils and cakes”.
If it wants to export, Russia knows that it will have to be irreproachable in terms of production conditions and traceability. On January 1, a law was promulgated to develop production. “It will also harmonize Russian standards with international requirements,” says Ms. Galina, from the national certification body. All producers will be accredited by government agencies”. The main purpose of this law to ensure that everyone is checked three times more than in Europe.
“70 producers are certified to EU standards, around 100 are in the process of being converted,” assures Serguey Korshunov, president of the Union of Organic Agriculture of Russia. This could seem anecdotal if not for the size of the farms, which greatly exceeds a thousand hectares. In the Ortcozka region, there is only one certified organic farm, but it covers 12,000 ha.
— President of Russia (@KremlinRussia_E) May 14, 2020
The Belgorod region has an ambition of 700,000 ha. converted to organic. If you compare with the 476,000 hectares that are organic or in conversion in the Occitanic regions, the leading organic region in Western Europe, or the 2 million hectares that are organic or in conversion throughout France, you can realize the magnitude of the Russian ambitions: in the long-term, Russians would be looking to convert 30 million hectares to organic.
In Russia, exports jumped to 905,000 tons during the week ending July 21. This is 2.4 times more than the previous week (377,000 tons). The main destinations for Russian wheat were Turkey (134,000 tons), Egypt (119,000 tons), and Oman (116,000 tons), a country on the Arabian Peninsula.
During the 2019/20 season, Russian wheat exports to Turkey were significant. “In Turkey, wheat imports jumped 67% to register 10.7 mtons in 19/20. Russia was the biggest supplier, accounting for 3/4 of total imports,” said Andrey Sizov, Managing Director of SovEcon. However, “in 20/21, imports should decrease significantly due to increased harvests and stocks. “
In Russia, weekly barley exports reached 94,000 tons and maize 26,000 tons. The cumulation since July 1 has risen to 446,000 tons for barley and 91,000 tons for corn. While barley exports increased by 2% compared to last year, corn loadings fell by 36%.
Where is Russia stood now? Will the country achieve its ambitious goals?
Russia is the largest country on the planet, with nearly 17 million km2. Endowed with very fertile arable black soils, the country exploits 220 million ha, that is to say as much as the European Union and Ukraine combined. After a sharp decline in agricultural production following the dismantling of the former USSR in 1991, cereal production in Russia recovered sharply from the mid-2000s following significant private productive investments and the reorganization farms.
“It is a kind of agriculture of firms, financialized, which is setting up”, indicated Jean-Jacques Hervé.
In Russia, most of the territory is covered with taiga, an area of forest where the frost is very long, the thaw also and the soils are impassable. The only agricultural lands are the naturally fertile black soils, which begin in Central Europe, extend into Ukraine and extend along the Caucasus, to the borders with Kazakhstan and China. In total, 220 million hectares of agricultural land is used by Russia, an area barely equal to Europe, if we add Ukrainian agricultural land. Today, these 220 millions of hectares produce 120 million tons per year in good years.
However, in 2017 Russia became the leading exporter of wheat, to everyone’s surprise, thanks to competitiveness based on economies of scale – the first major Russian agricultural group owns 600,000 hectares – and on integration (for animal productions).
“There is a very high concentration of capital, we are in financialized agriculture”, explains Jean-Jacques Hervé. Russian agriculture also benefits from the cash economy, which prevails in the country (to capture foreign currency to protect them from internal speculation). About twenty holding companies hold most of the land and are implementing an export strategy: dislodging exporters established on world markets.
For several years, the Russians have thus exported their wheat to Mediterranean markets via the Don, a river which gives them access to important outlets in Algeria, Morocco, Egypt, and Iran. Through the railroad network, Russia exports from Kazakhstan to the West or Asia (especially Japan, Korea, and Southeast Asia).
Overall, in the years to come, the increase will be based on performance. In the Barnaul region, where production will be concentrated, the Russian production will go from 2 t/ha of wheat to 4 or 5 t/ha because the temperature and water will allow them to be reached, in association with extremely mechanized agriculture.
At the same time, storage structures are improving thanks to the injection of capital obtained from gas and oil. And the dynamic should continue: “Today, Russia knows that in the medium term, it will export less gas and less oil”, since due to climate change, buyers will turn to greener energies, explains the specialist.
The result is spectacular: wheat production has doubled in just five years. That of sugar has quadrupled in eighteen years.
“Given the potential of areas still not exploited and the ambition of the authorities, it seems certain that Russia will be able to produce, in the more or less short term, around 120 mtons. of wheat”, explains Alexis Brault, a consultant at ODA. “It remains to be seen when?”. Asks the specialist.
At the current rate of development, and without major climatic incidents, this level of production could be reached as early as 2022. In the slowest of the scenarios envisaged, it would be within 10 years.
This way, we have learned that Russian power is increasing regarding its importance in the global agricultural market, it comes from the need of self-protection against the external threats from the country, but its success certainly is based on the strength of the Russian people and the knowledge of the techniques needed to develop the best practices around the world to become the first option to buy and sell, in a world that, more than ever, needs a constant supply of agricultural products.