Dmitry Medvedev: "There were quite a few problems in 2013. The flood in the Far East was by far the most significant one. It affected the agricultural sector as well. The Southern and the Volga federal districts were hit by drought. Nevertheless, according to Federal Service for State Statistics, the general figures look decent. Agricultural output was up 6.2% in 2013."
Opening remarks by Dmitry Medvedev
Report by Minister of Agriculture Nikolai Fyodorov
Dmitry Medvedev: <…> Let’s talk about our plans for agriculture this year.
Conference call on agriculture results in 2013 and plans for 2014
There were quite a few problems in 2013. The flood in the Far East was by far the most significant one. It affected the agricultural sector as well. The Southern and the Volga federal districts were hit by drought, while central Russia had rainfall during the harvest season.
Nevertheless, according to Rosstat (Federal Service for State Statistics), the general figures look decent. Agricultural output was up 6.2% in 2013. As you may recall, we had an almost 5% decline in the agricultural business in 2012, meaning that 2013 was a good year overall.
I hope that per-hectare subsidies have also played their role. Clearly, there still are problems. Fodder production was down due to drought in 2012. Excessive loans taken out by farmers greatly affected the production of milk, which was down relative to 2012. Given this, we must make government support more effective and take additional measures.
The industry’s growth is being held back by the agricultural companies’ high level of debt. According to the Ministry of Agriculture, in 2013, agricultural businesses received a total of 1.16 trillion roubles in loans, up almost 16.5% on 2012.
Dmitry Medvedev: "The Ministry of Agriculture and the Ministry of Finance suggest reallocating the funds within the State Agriculture Development Programme, so as to make these funds available to the most needy enterprises. As you may be aware, 170 billion roubles have been released from the federal budget to finance the state programme this year."
We are doing our part to make loans and interest payments more affordable. We provided subsidies from the federal budget to reimburse a portion of the interest paid on investment loans. A total of 44 billion roubles were set aside for these purposes in 2014. In addition, the Ministry of Agriculture and the Ministry of Finance suggest reallocating the funds within the State Agriculture Development Programme, so as to make these funds available to the most needy enterprises. As you may be aware, 170 billion roubles have been released from the federal budget to finance the state programme this year.
There still are outstanding debts on subsidies on investment loan interest. The situation is tangled, since investment loans have not been properly documented earlier. We will certainly make sure that this doesn’t happen again, but these loan arrangements need to change. Last year, we set aside more than 10 billion roubles to this end. The remaining debt totals more than 18 billion roubles. We certainly realise the importance of this for the regions, because major rural investment projects depend on this money.
Mr Fyodorov (addressing Nikolai Fyodorov, Minister of Agriculture), will you please briefly update us on this year’s plans and projects.
Report by Minister of Agriculture Nikolai Fyodorov
Nikolai Fyodorov: To begin with, 268 billion roubles have been allocated from the consolidated budget in 2013 in order to implement the state programme to support the agriculture, including 198 billion roubles (99.9% of this amount has been used) from the federal budget and another about 70 billion roubles from regional budgets on co-financing arrangements. This makes up 92% of the regions’ commitments. The regions fell short by 8%. The Government has increased its support by 25%, which amounts to 42 billion roubles for the first six months, making it possible to keep output in the industry growing.
Nikolai Fyodorov: "The Government has increased its support of the agriculture by 25%, which amounts to 42 billion roubles for the first six months, making it possible to keep output in the industry growing.
According to Rosstat, cereal production exceeded 91.329 million tonnes. The output of all crops except rice was up. In 2012, we had a large rice crop, and exports soared. But last year we fell slightly below the 2012 figures. Production of oilseeds, especially sunflower, rose by almost 30%, and rapeseed output was up by more than 35%. The production of flax and soy was down, though, mainly in the wake of the flooding in the Far East. Sugar beet yields reached an all-time high of 432 centners per hectare.
The production of livestock and poultry for slaughter grew by 5% on a live weight basis, mainly through increased production for slaughter of pigs (over 10%) and poultry (over 5%). Egg production declined by 1.7% mostly due to a significant increase in feed costs resulting from the 2012 drought.
We are still unable to resolve the main problem plaguing our dairy subsector. In 2013, the production of milk fell by 3.5%, at a time when the milk yield per cow was up 19 kg from 2012 at 5,007 kg per year, with most of the increase coming from modern dairy farms.
Of all agricultural sectors and subsectors, the dairy sector poses the most significant problems.
Nikolai Fyodorov: Production of oilseeds, especially sunflower, rose by almost 30%, and rapeseed output was up by more than 35%. Sugar beet yields reached an all-time high of 432 centners per hectare. The production of livestock and poultry for slaughter grew by 5% on a live weight basis, mainly through increased production for slaughter of pigs (over 10%) and poultry (over 5%).
New forms of support in 2013 included subsidies per kilogram of sold (commercial) milk. In 2013, 9.5 billion roubles were set aside in the federal budget to support this sphere of production. Due to the 2012 drought, additional resources in the amount of 3.2 billion roubles were provided to offset the cost of the feed, thus bringing the total support to 12.7 billion roubles. That’s a new form and an unprecedented amount of support for the dairy industry. Still, the livestock numbers and milk production are down.
According to our estimates, providing additional investment support to investment projects in the dairy industry is much more effective than spreading thin billions of additional roubles.
Dmitry Medvedev: What do you mean by investment support? Where could these funds be sent?
Nikolai Fyodorov: I’m talking about increasing the support for investment projects with subsidised investment loans from 8 to 15 years with an option to extend.
Dmitry Medvedev: Are you talking about new investment projects or existing ones?
Nikolai Fyodorov: Both. I’m talking about extending subsidising from 8 to 15 years and raising these amounts from 80% from the federal budget to 100% from the federal budget, plus three percentage points from regional budgets, as is done with beef production. According to our experts, this will translate into about five roubles of subsidy per kilogram of sold milk.
Dmitry Medvedev: Will all farms receive these five roubles per litre of milk or only the ones that are involved in investment projects?
Nikolai Fyodorov: The ones with investment projects.
Dmitry Medvedev: In other words, if we stick with such policies, the others will receive nothing? Not even 50 kopecks?
Nikolai Fyodorov: If we abandon the per kilo support of sold milk, they will not receive anything.
Dmitry Medvedev: Do you believe that such a support was ineffective and the support should be provided to those who make investments?
Nikolai Fyodorov: Yes, because we must look for forms of support that work better within budget constraints. Of course, if we have a choice, we’d be better off choosing the investment projects.
Nikolai Fyodorov: "I’m talking about extending subsidising from 8 to 15 years and raising these amounts from 80% from the federal budget to 100% from the federal budget, plus three percentage points from regional budgets, as is done with beef production."
Dmitry Medvedev: Got it. What shall we do?
Nikolai Fyodorov: We’ve already submitted our proposal to the Government and it has been supported by the Ministry of Economic Development and the Ministry of Finance. We’ve suggested that the term for subsidising investment loans should be extended from eight to 15 years and that federal budget subsidies should increase from 80% to 100%. Some 1.7 billion roubles will be required to extend the ongoing projects under the new terms. As for new projects, we should first deal with the aforementioned problematic debts.
Dmitry Medvedev: Do you think these debts should be cleared this year?
Nikolai Fyodorov: Yes, we suggest clearing them this year at the expense of economically important regional programmes. A lion’s share of funds should be used to clear the debts via internal redistribution. We should continue support for the regions that were flooded in the Far Eastern Federal District (1.5-2 billion roubles). We’ve also proposed that this year subsidies per one kilo of milk should also be used to reduce the debts. This is the proposal of the Ministry of Agriculture.
There is one more I’d like to make. At today’s meeting with Mr Shuvalov we discussed a free trade area with New Zealand…We want to support our dairy industry but must open our market to foreign milk and dairy products on WTO terms. We talked about New Zealand, but we must find the right balance. This is a serious issue…
Dmitry Medvedev: This is a serious issue. We must find a balance that won’t do damage to our agrarians. This is it. A free trade zone is great but only until national producers are in trouble. Why should we do this?
I’ve discussed this issue with our partners from New Zealand and with its Prime Minister more than once. Naturally, everything should be done in a rational way, proceeding from the interests of our producers.
Please submit your proposals on this score and we’ll think how to combine this goal with our plans for trade cooperation in free economic zones.
Nikolai Fyodorov: The same applies to beef. There are two issues – beef and dairy products.
On the whole, the buildup of domestic production in 2013 upgraded our food self-sufficiency in several products: grain, potatoes, oil (only vegetable oil for the time being) and sugar. We are on the threshold of food security in fish and fish products and ahead of schedule in reaching the threshold on meat and meat products but are lagging behind it in milk.
In general, the first year of our WTO membership has not had a tangible influence on our agro-industrial complex.
Nikolai Fyodorov: "In 2013, imports of agricultural produce, feedstock and food increased by 3.7%. However, in 2012 imports decreased by 5.1%. So during our WTO membership our imports went down by about 1.5%. I’m pleased to say that imports of meat and meat products decreased by 12.4% because we are growing stronger in this respect. Exports of agricultural feedstock went down by 6.7%; in 2012 they increased by 25%."
In 2013, imports of agricultural produce, feedstock and food increased by 3.7%. However, in 2012 imports decreased by 5.1%. So during our WTO membership our imports went down by about 1.5%. I’m pleased to say that imports of meat and meat products decreased by 12.4% because we are growing stronger in this respect. Exports of agricultural feedstock went down by 6.7%; in 2012 they increased by 25%. So the general balance is good. In 2012, exports grew because the 2011 embargo on grain was lifted.
This year we are planning to bring grain production to 95 million tonnes. The agrometeorological forecast and estimates of our experts show that we’ve preserved most of the winter crops – less than 5% were lost. The annual average figure is about 9.1%. This is fairly good, so we can be optimistic in this regard.
We are planning to produce 1.9 million tonnes of soya (a 20% increase) and 31 million tonnes of potatoes (+3%). In livestock breeding we are planning 3.4% growth in the production of cattle and poultry in terms of live weight. We hope to increase the decline in milk production and to bring it close to 1% growth.
As for the programme’s funding, I’ll recall that last year it amounted to 198 billion. In addition to this, we received another 42 billion roubles based on the results of the first six months. It is difficult to attract loans to the agro-industrial complex, but last year was positive in this respect. So objectively agriculture is reaffirming its status as an investment-attractive industry – naturally, with state support.
And the last issue – the requirement to reimburse interest payments on investment loans. This year it amounts to 77.9 billion roubles, including obligations on transferable loans (46.4 billion) and the funds for extra-plan loans taken before 1 January 2013 (18.3 billion). We should take into account some improvements in this respect due to optimisation. We’ve optimised subsidies on investment loans in the 2014 budget by 5% as well.
Nikolai Fyodorov: "This year it amounts to 77.9 billion roubles, including obligations on transferable loans (46.4 billion) and the funds for extra-plan loans taken before 1 January 2013 (18.3 billion)."
We include in the aggregate requirement the increase in expenses produced by the proposed decision to change subsidised periods for already granted investment loans on dairy farming. I’ve already mentioned its parameters here. We also consider the need to subsidise investment projects that began to be implemented before 2013 inclusive. In our estimate this year subsidies for them will amount to 11.5 billion roubles.
Considering the total budget of 44 billion roubles and the 5% optimisation, an additional requirement to reimburse the cost of interest payments on investment loans will amount to 33.9 billion roubles. If this issue is not resolved in 2014, it will be impossible to ensure stable operation of the industry, to say nothing of its development.
In light of all the economic and budgetary difficulties, we’ve submitted our proposals to the Government and suggest that the bigger part of the allocations for subsidies should be provided by redistributing the funds within the state programme.
Dmitry Medvedev: What percent will this produce?
Nikolai Fyodorov: Redistribution will produce about 60%…
Dmitry Medvedev: I see, and what about the rest?
Nikolai Fyodorov: We’ve asked the Government to allocate an additional sum of about 16-17 billion roubles after the execution of the budget in the first six months so as to resolve all the problems accumulated in previous years.
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