One hundred years ago, Russia’s vast land resources made it one of the world’s largest food suppliers. The capricious agricultural strategies of Soviet times not only put an end to that, but also saw the country forced to swap oil, gas and gold for food imports to feed the population.
However, with investment pouring into the country’s rich black earth, Russia could overtake the US as the world’s leading wheat exporter within nine years, suggests Arkady Zlochevsky, president of the Russian Grain Union.
Knocked from the front pages two years ago by the credit crisis, concern over global food security has not gone away. This has investors looking to secure land – another natural resource Russia has in spades. The question is, can infrastructure keep up?
The country is actively returning land to agricultural use (6m ha have been added since 2000, to bring the total to 48m ha, down from a Soviet peak of 70m ha) and investing in technologies and infrastructure to support grain exports: Russia’s ports had the capacity to ship just 5m tons annually in 2002; they can now send out more than 30m tons, and capacity continues to grow.
“Bearing in mind the country’s resource and bio-climatic potential, export of foodstuffs could become one of the key elements in Russian exports,” claimed agriculture minister Yelena Skrynnik during the recent St Petersburg Economic Forum.
According to forecasts by the Russian Institute for the Agrarian Market, in 2019 Russia could be harvesting 125m tons of grain, of which 45-50m tons would be exported (against 30m tons exported by the US).
The main markets for Russian wheat are North Africa and the Middle East, while just 0.5m tons heads to the EU. That “low quality food wheat” (according to international classification) makes up the bulk is not a problem, given that, in Europe, there is a developed practice of using food additives which enables bread to be baked from low-quality grain, said Zlochevsky.
Yet transportation remains a major problem. Viktor Zubkov, first deputy prime minister of Russia, admits that infrastructure development has not kept pace with dynamic production growth.
Despite over the last two years there being private investment in as many as 2,000 new trucks to carry grain, the country’s ageing rail infrastructure remains a challenge, with national rail carrier RZD predicting 57pc of its grain transport fleet being defunct by 2015. Meanwhile, ports are close to choking point, says the Institute of the Agrarian Market.
This is a common story as Soviet-era infrastructure crumbles. Pre-crisis, the state had pledged $1 trillion to rebuild the country’s transport network and other infrastructure, but this plan was knocked off the agenda as the economy tanked. It’s no coincidence that last November’s privatisation plan stars the country’s ports and other transport assets in the first wave. Russia’s farmers will be hoping to see quick progress.
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