The main achievement of the past year for Russian agriculture is the record amount of added value produced. The Ministry of Agriculture claims that in 2021 it increased by 23% to 4,4 trillion rubles, which is significantly higher than the growth momentum of 2020 (8,2%). At the same time, according to Rosstat, last year there was a drop in real production: the index of production of agricultural products at comparable prices fell to 99,1% from the previous year's level.
The Department of Agriculture explains this fact with the reduction in production of plant breeders due to unfavorable weather conditions, as well as the slowdown in the development of animal husbandry due to a severe epidemiological situation and rising prices for feed, energy and consumption. Against this background, high added value indicates that the agricultural sector is becoming more efficient, that is, the industry is developing through new production directions and means of production (mainly digital technologies), more modern processing objects.
In part, the main driver of the growth of the agro-complex in recent years has been the increase in exports and the expansion of its geography. Last year, sales of agricultural products abroad rose 21% from the record year before last year and amounted to $37,1 billion, according to the Agroexport Center. This means that farmers have already exceeded the planned indicators of the state program for the development of industry (37 billion by 2024). In 2021, Russia shipped more than 71 million tons of food and agricultural commodities to foreign markets. According to estimates by the Ministry of Agriculture, agricultural exports have already increased in value by 2022% in the six months of 16.
Exports grew the most oilseed products (by 29%) and meat and dairy products (20%), fish and seafood in ruble equivalent. The supply is to be strengthened, among other things, by an increased presence in Africa, the Persian Gulf, Southeast Asia and other countries. In total, exports could exceed the 40 billion dollar mark, as they have already reached 23,9 billion euros within six months.
As reported by the head of the Federal Center for Agricultural Export, Dmitry Krasnov, 259 export-oriented investment projects are currently being implemented in 71 regions of the country. According to his calculations, sales will increase by another 4,5 billion dollars with the start of new productions. Almost 80% of projects are created from scratch. “This means that advanced technologies are taken into account in the design and construction, and the new production facilities have great potential in terms of competitiveness,” says Dmitry Krasnov.
Most of the projects concern the food industry (bakery, confectionery, milk, fish and other products), the meat industry (raw meat), deep grain processing, the production of an oil-rich assortment. In total, more than 2024 projects in the agricultural sector have been registered or implemented by 1200, 305 of which are export-oriented. Investments in the last few years alone are estimated at 818 billion rubles.
The land is strewn with grain
The past year was not the most productive: Grains and Legumes collected just 121 million tons compared to 133 million a year earlier. The decline is partly due to a drop in acreage (47 million hectares, almost 2% below 2020 levels) as demand fell during the pandemic period, partly with bad weather. And yet the farmers made decent money as prices stayed quite high.
This year it is expected to reach more than 150 million tons: grain and legumes were sown more, especially Wheat. According to data from the Ministry of Agriculture at the end of October, the grain harvest in Russia was already 149,7 million tons in bunker weight, which is 30,7 million more than at the same time last year, with an average yield of 33,4 hundredweight per hectare (vs. 27 hundredweight a year earlier). ). Including the wheat harvest, the volume was 104,6 million tons (previous year 77,8 million tons). “In total, this season “EkoNiva” expects that about 930 thousand tons of various crops, including 755 thousand tons of grain, will be removed on the commodity wedge. This is an absolute record in the history of the company - 57 percent higher than in the previous year," says Stefan Dürr, President of "EkoNiva". – But in terms of quality, the 2022 harvest was worse than planned. This is due to copious rainfall and consequent excessive soil moisture during the peak harvest season.”
But far more than the bad weather, farmers are concerned about the low grain prices, whose volatility is due to both economic and geopolitical reasons. In the past year, rising grain and oilseed costs have also dragged down domestic prices, hurting the economies of feed and flour producers. Russia introduced export tariffs on wheat (and earlier on sunflower) in the spring, which caused the price to rise. After the start of a special military operation and the temporary closure of the Azov Black Sea Basin, the world's importers were afraid to be left without a third of the harvest that Russia and Ukraine usually provided. Unaware of what would happen next, major buyers of Russian and Ukrainian grain rushed to buy it everywhere — pushing wheat prices up a third to $400 a ton. The excitement lasted until May, when an all-time high was recorded with the grain selling for $490. As a result, the main importing countries filled the coffers by June, and by the beginning of the season trade was already running at $310-315 per ton. According to «Rusagrotrans» decreased to 13-13,5 thousand rubles from 17 thousand a year ago. The purchase prices for small water were also lower. Grain becomes cheaper and cheaper at the end of the previous farming season before a new harvest begins. "But this year the price drop was catastrophic, as the stock exchanges somehow reacted to the news about the record collection in Russia, but did not notice the forecasts of a decline in the world harvest due to the drought in the European Union," said Vladimir Petrichenko, CEO of ProSerno. In fact, according to a UN-FAO summer forecast, a drought in Spain, southern France, Italy and the Balkans may lose a significant part of the grain and oilseed crop, but it's all about Corn, Sunflowers and Barley. Wheat losses in the region of 40 million tons (2% of world exports) in Europe, India, Argentina, Australia and Ukraine are offset by rising gross fees in Canada, Russia (13 million tons each) and the United States USA (4 million tons) and offset by a slight increase in harvest in China and the Middle East.
Overall, less wheat was exported in the first three months of the new season than in the same period last year (10 million tons versus 12,4 million). "Export prices remain acceptable: they have only fallen to 2019 levels," explains Dmitri Rylko, CEO of ICARUS. “But the paradox is that Russian farmers are still in no hurry to part with grain. Not only the low market value of wheat interferes, but also the too strong ruble, which has increased the cost of grain production and delivery.” As a result, even large farms have slowed the export of new crop wheat or sold it at minimal margin. “In July we put a record volume of 164.000 tons on the market and ranked fourth among Russian exporters,” says Andrey Neduzhko, general director of Steppe Agroholding. "But the current price, resulting from the strengthening of the ruble and the availability of export tariffs, cannot compensate for the rising cost of production." It is likely that the profitability of growing crops (on large farms) will decrease by more than half. “The prices for fertilizers and plant protection products have doubled, for spare parts by 30-40 percent, agricultural machinery and fuel — 40 percent, services – 40-50 percent,” Andrei Neduzhko listed the main costs.
Although exports recovered somewhat in November, they sold grain to farmers at low prices, if they agree, then not for the good of life. “Wheat just has nowhere to store now. Our storage capacity is about 140 million tons, and the bumper crop of oilseeds will be added to the grain,” says Alexander Korbut, vice-president of the Russian Grain Union. “Activating exports would be the ideal way out, but we have a pessimistic forecast: with a high harvest, 56-60 million tons of grains and legumes could possibly be taken away against last year's 50 million tons, but it's good if it's possible would be to take away at least 45 to 46 million tons. And the main reason is tariffs and quotas.” However, Agriculture Minister Dmitry Patrushev is true to his word: “Export tariffs and quotas have proven their worth, have made it possible to eliminate deficits in socially important products and avoid sharp price fluctuations. We are monitoring the situation in real time and adjusting the regulatory mechanisms where necessary.” If the world price of grain falls to the level of the basic fee, it will be zero (it is now 2500-3000 rubles per ton, depending on world prices). "We believe that in the current conditions, this tool is optimally placed and will allow farmers to achieve sufficient profitability of production," added Dmitry Patrushev.
According to Alexander Korbut, farmers have to save on crop protection products and technical equipment as profitability decreases. “This year, compared to last year, the demand for soil processing machinery has not increased, as farmers have problems with grain processing,” confirmed Artem Ryazanov, general director of Belagromash. “We assume that sales of our devices will remain at the same level in 2021. Although our technology is entirely of Russian production, it is 20-30 percent cheaper than the European one and it is not inferior in quality. "
Oil dispenser expects lack of sunflowers
A record harvest of oilseeds is also expected in 2022, according to the forecast by the Ministry of Agriculture — up to 28 million tons. "Of course, there is a lot of export, and some oil extraction plants use their storage capacity," explains Sergei Maltsev, head of the Oil and Gas Association. "And yet, if, like last year, farmers hold onto seeds in anticipation of rising prices, we will face barn overcrowding." Last season, due to seed vendors' ability to calculate, oil extraction plants were loaded with less than ever with the release of sunflower oil in September - December 2021 is down almost a third from the same period last year. Processors have the power to remove the oil from at least 80% of the current crop, according to Serey Maltsev.
However, in September experts lowered the forecast for September oilseeds to 26 million tons, again because of the bad weather. “Our yield has increased by 2021 percent compared to 30,” says Sergey Gabestro, co-owner of the agricultural holding “Kipiai” (Chuvashia). “But it can't do everything e.gusabe built. Now it's raining in the central strip and on the Volga and the combine harvesters can't get into the field."
According to the IKARUS forecast, 16,3 million tons of sunflowers are expected compared to 15,6 million last season. “We are now breaking records in all major oils: sunflower, Soybean, Rapeseeds and oil juice. That's why the prices have gone down. And the further away from the ports, the stronger the decline,” says Dmitry Rylko.
Although the oil processing capacity is redundant (various estimates put a third to a half of it idle), there is interest in investing in the creation of new capacity. The Commonwealth company, the leader of our ranking, is now creating a large production cluster for processing oil crops in the Kursk region and has already commissioned the first processing plant worth 10 billion rubles. At the same time, the largest importer of soy, Commonwealth, will use local raw materials, which has already increased soy prices in the central part of Russia. In addition, this year the company has invested more than 30 billion rubles in the construction of a terminal for the export and import of grain and food products in the Kingisepp region of the Leningrad region. The works are scheduled to be completed in 2026, the total handling capacity of the new terminal will be up to 10 million tons per year. One of the leading agroholding companies, Rusagro, plans to invest 4 billion rubles in expanding the capacities of the Saratov Fat Combine, Balakovsky and Atkar Oil Extraction Plants.
A milestone in the market was also that in August, the Cherkizovo group, a leading meat producer and processor, launched a new business for itself and put its own oil extraction plant into operation — currently the largest domestic enterprise processing oil crops with high protein content . The volume of investments in the project has exceeded 10 billion rubles. Part of the soybeans for processing comes from the Cherkizovo group's own fields. The soybean oil, grist, hull and lecithin produced at the MEZ are shipped to the company's nine feed mixing plants in different parts of the country. Plans include exporting products to China, CIS countries and other regions.
Mühlviertler are happy about prizes
In this situation, the ball landed on the grain processors' side. The persistence and narrowing of export gates has certainly impacted domestic prices, which fell in most regions of Russia in November. According to “ProSerno”, grade 3 wheat fell most significantly in the Urals — up to 11,6 thousand rubles per ton (compared to 14 thousand last year), in the Volga — up to 13 thousand (against 16 thousand). "We have suffered losses for three years due to high grain costs, three large pasta factories have gone bankrupt during this time," notes Valery Pokornyak, owner of holding Altan (pasta production). “Now it's time for us to thread the holes. Although the unusually low prices do not benefit anyone: in the long run this will lead to a deterioration in grain quality and a natural lack of nutritious wheat.” Now those processors who have the opportunity like to buy grain cheaply, but these volumes are not enough to generate competitive domestic demand for grain. “Not all feed producers have their capacity to store raw materials, it was not necessary before,” explains Sergei Michnyuk, executive director of the National Feed Association.
For mills and feedstuffs, low prices do not guarantee record sales either. According to “Agroexport”, the export potential of wheat flour in Russia is 430.000 tons per year, although last year twice as much was exported. Today there is a chance to send abroad about 500 thousand tons of flour, but no more. "These are the quantities that could support domestic grain prices, but not the fact that processors are getting a reasonable price since the flour now stands on the foreign market as grain itself," says Valery Pokornyak. “Also because it is very difficult for us to enter foreign markets with flour, where Turkey, Egypt and Kazakhstan are traditionally strong. It takes years to forge new connections with foreign buyers of flour or pasta, and few people are able to do so without government help.”
Farmland has gone up in price
Investment in the country is not declining — but interest in it has increased, according to M&A deals. As the director of the department of big business of Rosselkhozbank Ilya Shumov explained at the conference “Agroinvestor” of “Russian Crop 2022/23”, from the beginning of 2017 to September 2022, 37 transactions for the purchase and sale of plant assets worth 161 billion rubles closed. The agro-complex called NI became the leader here. Tkacheva: In particular, he bought the company Sail Agro Group for their land, the land assets of Agronova-L and others, and moved from third to first place in the ranking of the largest landowners, according to the BEFL consultancy. According to them, in late 2021-early 2022, farmland prices in central and southern Russia increased by 30-50%, and in some regions by almost 100%. According to Bank Trust, the price per hectare in retail stores in the Krasnodar Territory after launch reached a record 532 thousand rubles. “Vegetable assets are in high demand among investors,” notes Ilya Shumov.
The agroholdings of the Volga region (Bashkortostan, Saratov and Orenburg regions, etc.), the Ural Federal District (Tyumen and Sverdlovsk regions) are also becoming more visible. "If companies are willing to buy land at a high price, they see a perspective in grain cultivation," says Alexander Korbut. "Now those who don't have a lot of money are returning the land put into storage."
Agriculture Minister Dmitry Patrushev believes that despite the current export difficulties, growing cereals and legumes remains a promising business. And to solve the problem with the abandonment of foreign carriers, the authorities took care of the construction of new ships. In order to promote the export of agricultural products, 2030 river-sea class ships are to be built by 41 to deliver the products to the ports and especially to large-capacity Handymax and Panamax class ships. "The development of our own fleet is one of the priority tasks," said the minister in the summer. Now the Ministry of Agriculture is negotiating with the Ministry of Commerce and the Ministry of Transport and is discussing government support measures for the construction of such ships.
Meat producers focus on efficiency
Butchers have weathered the overproduction crisis of the past few years, when the country's chicken and pork self-sufficiency surpassed all projected levels and exports have mostly shut down due to raging swine fever and bird flu. Last year, production of livestock and poultry for slaughter at all categories of enterprises was 15,7 million tons (only 0,3% more than in 2020), according to Rosstat, so the production of meat and offal increased in the seven months of this year at 8%. According to the forecast, the total amount of harvested livestock and poultry meat will reach 2022 million tons by 16.
Traditionally, pig farming is developing the fastest. While 2021 million tons of meat were produced in 5,5, which increased by only 0,4% in the previous year, production increased by 8% in the nine months of this year. "People started buying food for the future, for some reason fearing shortages," explains Yuri Kovalev, executive director of the National Pig Breeding Association. "Pork has become cheaper less than other types of meat - only by about one percent."
Several experts previously thought that prices had held back import volumes, which were almost non-existent but have been rising since the beginning of the year (after the government zeroed import tariffs at the request of processors who suffered shortages of raw materials last year). would have). But, according to Yuri Kovalev, imports do not have much impact on the market, since less than 15% (13 thousand tons) from a quota of 100 thousand tons were delivered to the country in the first half of the year. And in the second half of the year, due to increased logistics, imports fell to almost zero. In the end, Russian pig farm workers managed to bypass Argentine and Brazilian counterparts.
But the price brake with rising costs for means of production does not come from the good market situation either. Since the beginning of the year, Ukraine (they mainly bought a bacon) and sympathetic Vietnam, which two years ago was the first country to which we could take the first large quantities of meat, have given up Russian pork. Exports fell by a quarter within nine months. And there could have been even more if Belarus and Kazakhstan had not taken over part of the lost volumes. This year only 170 thousand tons of pork will be exported abroad (against 220 thousand tons of pork). last year), although production growth will be 8% or 350 thousand tons, which will certainly please meat processors.
Previously, the industry developed by starting new businesses (there are fewer animals in private farms every year, which are becoming smaller and smaller due to swine fever). A total of 2016 objects were built and 2021 objects were reconstructed and modernized in the years 134-51. Last year alone, new businesses spent an additional 111.000 tons of pork.
It should be assumed that the efficiency of the industry will increase in the future, e.gusammen will increase with their volumes as a number of large modern productions will emerge. The most capital-intensive project is the leading meat producer of the Cherkizovo Group, which this year is investing 8,5 billion rubles in the construction of new pig complexes in the Tambov region. “The implementation of the project will allow the company to increase the production capacity of pork by more than 45.000 tons per year. “Cherkizovo” also plans to invest more than four billion rubles in expanding production of a local feed,” says Rustam Hafizov, head of the Cherkizovo Group's Innovative Analysis Center. “We are also continuing the project of creating a meat processing cluster in the Tula region (TOSER Efremov), within the framework of which within a few years a slaughter, storage and processing plant, as well as a slaughter plant, primary and subsequent processing of broilers will be built.” “Cherkizovo” is also developing processing, for which it is constructing two production buildings of the Cherkizov Meat Processing Plant in the north-east of Moscow.
In 2021, poultry production continued to stagnate at 6,7 million tons. In 2022, the industry has a new problem: Because of bird flu, Russia has imported far fewer hatching eggs in some countries than before. But with the introduction of 8 new and 11 modernized poultry farms, the dependency on hatching eggs should decrease from 15% (previous year 600 million pieces) to 12%. “According to our data, the volume of hatching eggs purchased in foreign markets in 2022 will not exceed 400-420 million pieces,” says Sergey Lachyukhov, general director of the National Association of Poultry Farmers. “The forecast for 2023 is even rosier: the twenty leading poultry farmers will supply themselves completely with a hatching egg from their own breeding plants.”
Despite the stagnation, investments in the sub-industry do not stop: more and more modern birdhouses are being built, counting on successful competition from new technologies. For example, the Buya poultry farm has started a workshop for 72.000 laying hens. In the village of Chertanovo near Volokolamsk, the poultry-breeding complex «Farm M2» worth 650 million rubles for 80.000 heads was opened.
Experts no longer fear overproduction because Russia has increased exports of poultry meat to Saudi Arabia and the United Arfrom Emirates. From January to September, sales in the UAE quadrupled — to 8,7 thousand tons, and Saudi Arabia bought 38,8 thousand during this period. “Poultry farmers discovered these markets at random and mastered Halal technology,” says Sergey Lachtyukhov.
In 2021, the live weight production of cattle for slaughter at farms of all categories was 2,87 million tons, up 1% from 2020. The growth was achieved by farms and farms actively encouraged by the state. On the other hand, private farms, where up to half of the beef consumed is grown, saw a decline of 2,8 percent. In general, last year the meat stock increased by 3,2% to 1092,5 thousand heads. Private consumers are being pushed out of the market by new, more efficient productions — 30 were launched in 2021, and three more were modernized. However, beef prices still need to be pushed down: last year's tariff concession for imports of 200.000 tons of beef was extended for next year. Without them, according to the Ministry of Agriculture, meat would be 20-30% more expensive. According to the President of the National Meat Union Sergey Yushin, if in January?supplies of beef from abroad in February were 36 percent higher than a year earlier, since March they have fallen by more than two-thirds due to increased logistics costs and a strengthening dollar. "But after the strengthening of the ruble, it became more profitable to import beef, as a result, we received many new requests for importing beef within quotas," says Sergey Yushin. In turn, the Director General of the National Association of Cattle Producers Roman Kostyuk stated that due to the duty-free import of beef, meat processors (in whose interests it was introduced) began to reduce purchase prices for farmers, which has prevented the implementation of investment projects at large producers delayed. Especially in May-July, the purchase price of live bulls fell from 222 to 169 rubles per kilogram of live weight. “In the future, duty-free import will make processors dependent on imports of foreign raw materials,” claims Roman Kostyuk.
However, Sergey Yushin believes that the production of beef in Russia will remain at the same level until 2022 and even slightly exceed it due to the preservation of investments.
Source: EXPERT (Russian)