Russian Greenhouse sector and its perspectives under new circumstances
In recent years, the greenhouse sector in the Russian Federation actively developed thanks to successful government support measures. Currently, the market is undergoing significant changes, due to COVID-19 pandemic. Nevertheless, the dynamics remain still positive in the greenhouse chain. According to experts, by 2025 it is planned to increase the share of domestic greenhouse vegetables in the Russian market to 85%. However, government support for domestic vegetable growers is a determining factor for the food security of Russia under the current economic circumstances.
The impact of the Corona virus crises to the Russian greenhouse sector and its perspectives under new circumstances were discussed during a webinar arranged by Vostock Capital. The webinar was organized in the framework of preparations of the 5th Annual International Forum “Greenhouse Complexes Russia and CIS 2020”, which is foreseen on 2 - 3 December 2020 in Moscow.
One of the speakers of the webinar was Sberbank representative Tatyana Kreitor, Executive Director of Corporate Client Development Department. Tatyana Kreitor presented the analytical review of the Russian agribusiness sector with its focus on the current situation, prospects for 2020-2022 and industry trends. In particular, her presentation highlighted the impact of the COVID-19 pandemic on the greenhouse sector in Russia.
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Impact COVID-19
Due to self-isolation of the population and poor organization of food deliveries in remote regions in Russia as well a decrease in population incomes and, as a result a focus on products with a long shelf life, the Russian market on fruit and vegetables has slowdown since the pandemics started in March 2020. At the same time fruit and vegetable growers lost access to the catering sector, which forms about 30% of the market. Another threat for the growers are the significant costs for energy and water supply, high credit burden, expensive logistics and rising costs for additional packaging (from 40 to 80 rubles/kg) and for importing seeds and equipment. The downward trend in import prices and as a consequent an increase in competition of vegetables from countries like Azerbaijan, Uzbekistan, Georgia and Moldova is a challenge for the Russian greenhouse sector as well. So far, the selling prices in 2020 in Russia are reduced by 13-20% compared to 2019. This has led to a situation where Russian producers of fruit and vegetables have decided or will decide to reduce their volumes by 35% in April-May in a number of regions.
Potential Greenhouse Sector
The greenhouse sector in Russia is characterized by a high competitive environment and a high import component of vegetables. However, self-sufficiency in the Russian Federation tends to 85% or even more due to the setting into operations of greenhouse investment projects (2018-2022) and implementation of new projects in particular in regions with a high import component. According to Tatyana Kreitor, growth in the Russian market is possible due to improving the quality and expanding the range of new varieties of tomatoes and cucumbers; including the reference to taste preferences in the regions. According to experts the major sector growth potential is in the Far Eastern and Siberian Federal Districts due to low self-sufficiency of fresh vegetables in these regions. The main supplier of fresh vegetables in Russia’s Far Eastern Federal District is China and the main suppliers to the Siberian Federal District are Mongolia and Kazakhstan.
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Needs in Russia
An experienced team, attracting external consultants to assess the market, focus on new technologies and state support for investments in greenhouse complexes such as subsidies, allocation of land for the construction and preferential tariffs for energy and water supply are the main requirements for a well-developed modern greenhouse sector in the Russian Federation. Regarding management of a complex, optimization of cost and technological processes as well as reduction of production costs of technology, personnel and market analysis are some of the most important aspects for successful growing of indoor vegetables in the Russian Federation.
Support measures
The fresh fruit and vegetable growers in Russia asked their government for operational support to avoid a crisis during the COVID-19 pandemic. Besides measures like a tax break or preferential tariffs for energy and water supply, the prolongation of attractive loans issued for the construction of new and innovative greenhouse complexes up to 12 years and an increase of the maximum size of a short-term loan up to 600 million till 1 billion rubles would help the Russian greenhouse sector a lot in the near future.
LAN-Moscow