Video: Russian agriculture crippled by inefficiencies

An unmotivated labour force is one of the biggest obstacles to increasing production, says a Russian agronomist

Canadian farmers shouldn’t spend too much time fretting about Russia when doing their long-term planning, says an agronomist familiar with agriculture in that country.

“Don’t be afraid of Russia,” said Tobias Schenk of Black Earth Farming Ltd., which farms 600,000 acres of the country’s best farmland.

“We have potential. We will become more professional. But it will take a while.”

Delegates attending Agri-Trend’s 2013 Farm Forum Event groaned with envy when Schenk showed them a picture of the rich black soil in the Voronezh oblast where he farms.

He told them incredible potential is contained in that soil, but it won’t be realized for a long time because of financial constraints, a lack of crop inputs, malfunctioning equipment and labour issues.

The company Schenk works for is a good case in point. Black Earth Farming was established in 2005 and rapidly became one of the largest owners of prime Russian farmland.

It had access to all the investor capital it required before the global economic meltdown of 2008.

“If we needed 10 tractors, we just had to make a phone call to the Moscow office,” said Schenk.

Those days are long gone. Shares that once sold for $70 US each are now worth $6.20, and $448 million of investor capital has evaporated. The company wants to convert more acres into corn and soybeans, but it can’t afford the required storage and drying capacity.

Schenk said most farmers in Russia face similar financial constraints. Their credit load was 34 percent higher than their income in 2012, and he believes it will be closer to 40 percent this year. As a result, they are unable to service their debt.

“I don’t know what the government will do about this,” he said.

“I estimate they just will kick the can down the road and extend (more) credit for the farmers.”

He said the financial constraints create other problems.

“Over the whole of Russia, not even half of all the fields get fertilized each year.”

Part of the problem is that fertilizer is sold in 800 kilogram bags, which require specialized handling equipment.

As well, farmers tend to broadcast fertilizer rather than placing it in the furrow, which is less effective.

“There is big room for improvement in fertilizer in Russia,” he said.

The herbicide market is plagued by counterfeit products and poor quality generics. As well, growers tend to use much more water than they should when applying herbicides.

Equipment breakdowns are a big problem because spare parts are hard to find and can take three weeks to arrive from North America. Farmers don’t have much experience repairing machines.

“The Russian tractor drivers, they’re used to fixing tractors with a sledge hammer and a pry bar, and of course western equipment is sometimes a little bit more touchy.”

Most farms don’t have heated shops, which makes it difficult to fix equipment during the winter.

“Buying is one thing, but maintaining good equipment and to keep it running is really a challenge in Russia,” he said.

The biggest obstacle confronting Russian agriculture is its inefficient and unmotivated labour force. Most farms still take a Soviet-era approach to agriculture, where each worker has a highly specialized job. A tractor driver would never do another task on the farm other than driving the tractor.

Few family farms produce talented and enthusiastic workers, and it is difficult to recruit and keep talented young workers because many rural areas lack schools, doctors and other essential services.

“It really makes it hard to find young people who are passionate about the profession,” said Schenk.

Workers earn about $10,000 per year, and the farms pay their income taxes, which is 32 percent of their take home pay. Schenk figures the labour cost is similar to a Canadian farm because it takes at least two Russian workers to do the job of one Canadian worker.

He said there is no long-term planning on Russian farms because they are solely focused on next year’s profits.

The Russian government has established a goal of producing 100 percent of the country’s grain needs and 80 percent of its pork requirements by 2020, but Schenk said that could be difficult to achieve.

Russia had to reduce its import tariffs and domestic subsidies when it joined the World Trade Organization. Direct subsidies have de-creased by 30 percent to $4.6 billion a year, which is about $2 billion less than Canada spends on its farmers.

Schenk said Russia will have good weather years that allow it to be a major player in export markets, but it will be a long time before the country is a consistent and reliable exporter like Canada and the U.S.

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