OTTAWA — The Russian government has made important strides to reform its agricultural system and if it continues the reforms, a payoff in increased production could happen quickly, says a World Bank economist.
However, Karen Brooks also said there are signs of weakening government resolve, including a recent promise to inject billions of subsidy dollars into the sector.
“The subsidies are still flowing to the old-style farms,” she said in a Feb. 10 interview from Washington. “But we can see the process of reform is in place and if the government perseveres, real reform will be a fact of life. At the very least, it can keep the system on hold and stop it from going back.”
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And “real reform” could lead to an expansion in grain production which could sharply reduce import demand and perhaps even put Russia back into the club of grain exporters.
“My own sense is that these reforms could bring about a revitalized sector quite quickly, but that is conjecture,” she said.
Brooks, a senior economist in the agricultural policies division of the Washington-based World Bank and co-author of a recent study on Russian farm policy reform, said land reform and policy liberalization are key.
A constitutional amendment allows farmers to own land and gives members of collective or state farms a share of the assets.
She said that by last summer, close to 260,000 Russians could be classified as small private farmers using eight percent of agricultural land.
“They are still a very small portion of the Russian farm sector but it is a start,” said Brooks.
She said these private farmers are proving to be more flexible when reading and reacting to market signals about which commodities the market needs and will pay for at levels high enough to make the farm profitable.
Many of the new private farmers lack the overall management skills that western farm operators have, but they are learning, she said.
At the same time, the World Bank study argued that the Russian government must maintain its commitment to reducing farm sector subsidies. It must also allow market forces and the breakup of the old state farm system to continue.
In recent weeks, there have been signs the government is retrenching by announcing a huge subsidy program for the traditional farms. There may also be a return to larger food subsidies.
Brooks said this would retard the pace of reform but she doubts the reforms that have taken place can be reversed.
Liberalizing the economy would increase the price of grain, reduce the production of cattle and perhaps even return the country to a grain-exporting status, she said.
Grain prices already are rising, livestock production is falling and wheat acreage is increasing.
