Russian agriculture trends during coronavirus pandemic

Agricultural machinery sales increased by almost 50%

Domestic manufacturers of agricultural machinery increased sales in the first half of 2021 by 49% to RUB 93.9 billion. At the same time, the volume of production increased by 45% to 112.7 billion rubles, the press service of the Rosspetsmash association reported. Among the main reasons for such dynamics are good prices for agricultural products, thanks to which the agrarian business has additional funds to upgrade equipment.

In addition, there is still a high deferred demand for agricultural machinery, the association notes. Also today, Russian manufacturers do not experience such problems with the supply of components as some foreign companies. This is due to the high share of localization of products and the fact that domestic factories for production of components did not suspend their work.

The current set of state support measures aimed at developing production (Program 1432 and preferential leasing), subsidizing R&D and transportation also positively affects the domestic demand for Russian agricultural machinery. Thanks to this, enterprises can afford to invest in the expansion and modernization of production facilities, in the development and release of new models.

Cost of transporting food has risen sharply

Industry unions of food suppliers announced an increase in prices for domestic and foreign transportation, as well as a lack of free transport, Kommersant reports.

According to the Potato Union, in a number of directions, the cost of transportation has increased by at least 20-30% compared to last year, and in some cases it has doubled. This is due, among other things, to a shortage of refrigerated transport and a shortage of drivers from the CIS countries against the backdrop of a pandemic.

The Association of Confectionery Enterprises "Askond" fixes an increase in the cost of transportation on domestic routes by 10-15%, and on international routes - from 24% to 160%. On average, logistics have risen in price by 15%, and due to the lack of free trucks, carriers have the opportunity to dictate prices. In some cases, they unilaterally withdraw from the contract. The head of the National Meat Association, Sergei Yushin, told Kommersant that, on average, transportation prices increased by 10-11% year-on-year, but the dynamics strongly depends on the specific direction and differs seasonally. According to him, there are certain problems with free transport, which have arisen, among other things, due to people leaving this business.

The Ministry of Agriculture is considering possible solutions to the problem with the Ministry of Industry and Trade and the Ministry of Transport. The solution may be to subsidize the transportation of food, reduce the load on road carriers and take measures to reduce fuel prices.

“In Russia, the increase in prices for motor transport services, on average, amounted to 11.5%. In  case of attracting additional carriers due to decrease in the volume of supply from transport companies, the cost of road transportation is observed to be 50-80% higher than the base one”, PepsiCo said. This may be a consequence of a decrease in the availability and a significant increase in the cost of vehicles in 2020-2021, an increase in the cost of car parts, an increase in the cost of fuel, administrative pressure in some regions of Russia (for example, the introduction of strict restrictions on vehicle traffic along the Moscow Ring Road).

Pork has risen in price in Russia

Over the year, the production costs increased by 25-30%

According to Rosstat, pork became the most expensive product in retail last week - its prices increased by 0.9%. Beef rose in price by 0.3%, mutton - by 0.2%. Prices for poultry meat rose slightly - by 0.1%. Director General of the National Union of Pig Breeders Yuri Kovalev said that over the past 15 years until the end of 2020, wholesale prices for pork have been declining, while retail prices have been approximately at the same level. “Therefore, the current slight rise in prices for this type of meat is a delayed effect of the fact that prices have hardly changed for a long time. It is also worth noting that there was inflation during this period,” he said.

According to him, prices for pork, primarily in retail, do not show a significant increase. The reason for this is that the work with retail is carried out under long-term contracts, so an increase in production costs, a decrease in production or an increase in demand do not immediately affect retail prices. “There are factors that can have a long-term impact. First of all, this is an increase in the cost of pork production over the past year by at least 25-30%. The government's actions to regulate the grain market helped to stabilize prices. Now its price is at the level of 14-16 thousand rubles per ton, and not 18-20 thousand rubles per ton, as it was at the end of last year." The cost of all amino acids, vitamins, mineral supplements, packaging, and transportation also increased. Due to the lack of a sufficient number of migrants, the cost of labor resources increases as well: the supply on the labor market has sharply decreased, which necessitated an increase in wages.

The growth in production costs this year was compensated for by the producers' margin, those companies that did not have it began to operate at a loss. Also, the ratio of supply and demand is of key importance. This year, as in 2020, there is an increase in demand, primarily due to a decrease in mass outbound tourism. In addition, July-August is the peak of the kebab season, which helps to maintain high demand. “In the first half of 2021, pork consumption increased by 1%. It seems that this is not much, but you need to understand that last year the growth was a record 5%, - said Kovalev.

The head of the National Union of Pig Breeders pointed out as one of the main problems a complex of epizootic problems that worsened at the end of last year and still persist. There were very serious outbreaks of African swine fever at enterprises in the center of Russia - in the Tver, Kursk, Tambov, Pskov and Voronezh regions. As a result, 700 thousand pigs were culled there. This has a long-term impact on livestock growth in 2021. In addition, there is a complex of problems with the reproductive and respiratory syndrome of pigs accumulated over the years, now it is recorded mainly in the Central Federal District. Many companies have decided to depopulate their herds in order to renew their livestock.

Organic farming in context of the coronavirus pandemic

In the context of the coronavirus pandemic, organic farming, despite the emerging difficulties and restrictive measures, showed growth. According to the members of the Union of Organic Farming, three important trends are obvious.

First, the coronavirus has more clearly demonstrated the value of organic production as a factor in the formation of strong immunity of the population through high-quality healthy food and, in general, has increased the level of understanding of the importance of an environmentally friendly environment. Responsibility for the impact on the body, soil, air, groundwater, living organisms and their natural relationship in nature has become more obvious to market participants, the expert community and consumers. There has been a major revaluation in favor of organic farming.

The second trend is that the organic production system is being formed according to the principle of self-isolation. Here local resources are used, ideally a closed production cycle is used, a bank of seed and planting material is formed, soils on which organic farming is conducted are not depleted, their natural fertility is restored and maintained. In the production of organic products, domestic means of production are used, and dependence on imports is reduced. It is an environmentally friendly and sustainable option for the country's food security.

And the third trend is the development of Russian regional markets for organic products. Considering the territory of Russia, this is the most important trend in the development of organic matter, and which fully corresponds to the philosophy of organic farming - where it produced, there it is sold and consumed.

Dependence on imported seeds and veterinary drugs

However, COVID-19 revealed the problem areas of the Russian agro-industrial complex - in particular, it showed the dependence of the agricultural complex on imported seeds and veterinary drugs.

Experts estimate the share of imported products in the market of veterinary drugs at the level of 60-65% in general. However, for example, in pig breeding, the import of pharmaceuticals is only 20-30% of the volume of domestic consumption, according to the director general of the National Union of Pig Breeders Yuri Kovalev. Over the past 20 years, either domestic companies have been created in the country, or the production of world leaders has been localized. The situation is worse with vaccines: about 70% of them are imported. Russia practically does not import live animals, and the parent stock is almost 100% domestically produced.

LAN-Team Moscow

Sources: Agroinvestor,  AGROXXI, RG.ru