Strong grain prices are sparking the investment needed to restore former Soviet states as agricultural powerhouses.
The former Soviet Union has the soil and climate to be a global breadbasket but the inefficiencies of the collectivist past, compounded by economic collapse when communism fell, prevented the region from capitalizing on its potential.
But that is changing as money and expertise flow into the region’s farms.
The first evidence of concrete change might be the prospect of a bumper harvest this year.
Estimates of Russian grain production range from the government’s forecast of at least 85 million tonnes to an industry forecast of 97 million, the most in 30 years. Ukraine is forecast to produce about 45.5 million tonnes, up from 28.2 million last year.
Read Also
One Beer Market Updates Day 3 – Lentils and beef
Day 3 of the One Beer Market Update at Ag in Motion 2025.
There are quality problems, but the volume has reached levels not seen since the communist era.
Both countries expect to greatly increase grain exports this year after severely limiting them last year to control rising food prices.
Still, yields are far behind those common in Europe and North America. Winter wheat yields less than 30 bushels per acre in Russia, but about 80 bu. in Europe.
Some additional land may be brought into production, but the biggest opportunity lies in raising yields.
The government has announced its intention to increase production by 50 percent in the next five to seven years.
An agricultural situation report from the U.S. embassy in Moscow early this year noted Russia’s agricultural ministry planned to procure 23,000 tractors, 7,900 grain harvesters and 3,000 forage harvesters this year. More money was made available for farmers’ fertilizer purchases and agricultural loans, and equity investment rose.
Huge investment will also be needed for grain storage, rail cars and port facilities. Officials are already worried there will not be enough storage for this year’s crop.
Canadian farm equipment makers, like Westfield Augers and Buhler (which is owned by a Russian manufacturer) are benefiting from increased sales to Russia and its neighbours.
If Russia succeeds in expanding grain production by 50 percent, that would equal about 40 million tonnes of grain, which in the past would have had the potential to lower global grain prices.
Also, Russia’s government is converting its Agency for the Regulation of Food Markets into a grain handling and trading company by transferring controlling interest in 28 of the country’s major grain elevators and export terminals.
In a few years, the state grain trading company could control up to half of Russia’s grain exports. American diplomats have criticized the move, saying a state agency could manipulate exports the same way that Gazprom, Russia’s natural gas exporter, has manipulated sales for diplomatic reasons.
But not all of Russia’s increasing grain production will be exported. Demand from domestic livestock will increase.
Russia’s livestock sector is only now recovering from devastation that followed the end of communism.
Russian incomes collapsed and per capita meat consumption fell to 40 kilograms per year by 2000 from 61 kg in 1992.
The number of cattle in the Russian Federation fell steadily from about 80.6 million in 1990 to 25.7 million this year. The swine herd fell from 87.4 million in 1990 to a low of 47.6 million in 2000, recovering to 60.3 million this year.
Since 2000, meat consumption has been recovering along with incomes, but much of the demand has been met by imports because the country’s livestock facilities are mostly old and inefficient.
Russia spent about $4.5 billion on meat imports last year, according to a recent Reuters story. Russia was Canada’s third largest pork customer in 2007, buying about $145 million worth.
To build the country’s livestock production capacity, the government is investing heavily in new, efficient barns.
If the policy is successful, the increased livestock herds will eat more feed grain and limit the increase in the amount that must be exported.
