Hu Glacier: Russian Agriculture from Putin's Countersystem

Russian Agriculture and Related Effects from Putin's Counter-system

hu Glacier

(Institute of Rural Development, Chinese Academy of Social Sciences)

when I got up in the morning and heard the radio saying, "Putin ordered a counterattack: banning the import of agricultural products and raw materials from sanctioning countries", the first reaction at that time was very surprised. In the following news, it was mentioned that "Putin also ordered the government to prevent rapid increases in the prices of agricultural products and food, and instructed the government, together with product manufacturers and retailers, to take joint measures to increase the supply of domestic goods. Leaving aside emotional factors and other issues, we can objectively analyze the effects of this counter-policy.

On the surface, this news is a countermeasure against Western sanctions against Russia, and it is a straightforward political statement; but, in essence, it also contains an idea that Russia hopes to improve domestic agricultural production capacity by trade protection. Further progress has exposed the profound problems in Russian agriculture, which is why there are such sayings as "the import of agricultural products, raw materials and food from countries that impose sanctions on Russia will be banned within a year" and "to prevent rapid price increases. Therefore, such a political statement itself lacks confidence.

Looking at Russian agriculture from the perspective of a Chinese agricultural researcher, I always feel a little awkward. The specific differences are:(1) Russia's agricultural production has changed so much that it is emotionally unacceptable. For example, Russia's grain output in 2011 was 94 million tons, but plummeted to 71 million tons in 2012. This figure is just a microcosm of the sharp fluctuations in Russian agriculture. In addition, the same is true of animal husbandry, where there are not only natural and market risks in agriculture, but also profound organizational and institutional problems, which will not be discussed here;(2) the trend of agricultural imports in Russia is increasing, but the instability of output leads to the instability of trade. This is also in line with Russia's national personality. In the Soviet Union, there was a famous "harvest illusion" and the United States was not shallow.

Specifically, from the perspective of the sanctions measures themselves, although Russia has a vast territory and abundant resources, due to a series of problems including historical reasons, in addition to the self-sufficiency of grains, many livestock products, sugar, vegetables and other just-needed foods are still imported from the international market. Judging from the distribution of import source countries, the source countries of sugar are relatively rich, but livestock products, the main reason is that the imports of chicken and pork come from "countries that impose sanctions on Russia". Specifically, they are mainly affected by Germany, France, the Netherlands, Spain, the United States, and Ukraine. Vegetable imports mainly come from Eastern Europe, and the most important is Ukraine.

Table Some sources of agricultural imports in Russia

Items (ton)	Meat, chicken	Meat, chicken, canned	Meat, pig	Meat, pork	Sugar confectionery	Sugar refined
France	16602	6894	20959	14240	328	9609
Germany	23665	4976	18402	92761	3978	1670
Netherlands	1128	182	6183	6207	2486	7
Spain		12	10106	41821	782	0
Ukraine	5240	4	2568	9662	37514	1
United States	253319	0	14501	45179	1362	397

source: FAO

further, the specific effects of sanctions must be compared in relation to imports and domestic production:

chicken

in 2011, Russia imported a total of about 400000 tons of chicken, about 300000 tons from "countries imposing sanctions on Russia", accounting for about 75%. In the same year, Russia's chicken production was about 3 million tons, and it showed an annual increase. At the same time, due to the loss of chicken raising in 2011, the industry's call for the government to protect the domestic industry is also very high. From this perspective, Russia's restrictions on chicken imports will objectively lead to an increase in domestic chicken prices. After all, the supply of potential import losses accounts for 10% of domestic production, but it will promote the development of the domestic chicken industry. In addition, due to the high feed economy of chicken itself, the short breeding cycle and the wide range of feed substitution, under the condition of sufficient food supply in Russia, this policy will promote the expansion of the scale of domestic chicken breeding and the increase of the proportion of chicken consumption.

In addition, from the perspective of chicken exporters such as the United States, the annual output of chicken in the United States is about 17 million tons, of which 3 million tons are exported to Russia, accounting for 250000 tons, accounting for 8%. At the same time, the proportion of German and French chicken exports to Russia is not high. In addition, there is a large space for adjustment of chicken production, so the effect of sanctions on chicken exporting countries is actually very limited. Combined with the above, from the perspective of chicken trade, the essence of sanctions is not very significant, both sides have their own gains and losses, but through this measure to achieve Russia's inherent goal of promoting the development of the chicken industry.

Pork

in 2011, Russia imported about 500000 tons of pork, most of which were imported from the European Union. In the same year, domestic production was about 2.4 million tons, and imports accounted for more than 20% of domestic production. From the perspective of rival countries, Denmark and Germany's pork exports to Russia account for about 10% of their own exports. Due to the long production cycle of pork and the relatively large investment, it will have a greater impact on the exporting country, and it will also have a great impact on the price of pork in Russia. After all, the investment and production cycle of pig breeding are not the same as chicken production. This sanction will have a great impact on the major pork exporting countries of Russia and the European Union, but it will have no impact on the United States.

Does China have enough pork to fill the gap in the Russian market? This is a thought-provoking question. From a political point of view, the export of 500000 tons of pork to Russia is a fraction of the domestic output of about 55 million tons. However, from the perspective of market practice, China's pork production accounts for half of the world, but it still needs to import pork products including pig water from overseas. The domestic pork market is actually relatively tight, and the consumption elasticity of pork is very small, little changes in the market balance will bring about large fluctuations in domestic market prices, so from the economic level, China has no chance of this.

Sugar, vegetables and others

in 2011, Russia imported a total of 2.33 million tons of sugar, and the sources of sugar are scattered, including Southeast Asia, South America and other parts of the world. Therefore, restricting EU sugar imports will not bring risks to Russia's sugar safety. At the same time, Russia's domestic sugar beet production is also showing a rising trend. On the other hand, the European Union and the United States are neither the main exporters of sugar, nor export a large amount of sugar to Russia. However, half of Ukraine's candy is exported to Russia. From this point of view, this sanctions measure is mainly aimed at Ukraine, and it is estimated that the effect will be very significant. Although the import volume of vegetables is large, the effect of sanctions is relatively small due to the low value of the goods, which will not be discussed here.

As to whether China has the opportunity to increase sugar exports to Russia, the answer is still no! Because the current domestic and international market sugar prices are seriously upside down, domestic sugar prices are much higher than the international market prices, in addition to political exports, market spontaneous factors have no incentive to promote China's sugar and sugar exports to Russia.

Brief Summary

1. judging from Russia's countermeasures, political statements are actually greater than economic interests. Although it will boost the enthusiasm of the Russian planting and breeding industry in the short term, due to the lack of a long-term mechanism, this policy cannot form an effective incentive for the domestic industry, which makes Russian agriculture fall into the normal state of large fluctuations.

1. The price of meat in Russia will show a more obvious rise in the short term, especially pork, which will affect the well-being of domestic residents. At the same time, this issue will not change because of the oath of political slogans. However, it will also have a greater impact on EU pork exports, which is bound to cause dissatisfaction among some EU agricultural producers.

1. The United States is least affected by the sanctions. After all, the agricultural trade relationship between the United States and Russia is chicken, which is the least affected agricultural product; while Ukraine is the most affected, one is because Ukraine is a traditional agricultural product exporter, and it is also an effect. The room and depth of adjustment are relatively limited, so the main target of the sanctions policy is Ukraine.

1. In this round of game, the potential profit of Chinese agriculture may be small, and the probability of direct trade profit is smaller. It can potentially directly participate in Russian agriculture through agricultural going out. However, in this process, we should consider a series of risks such as Russia's politics, law and policy. I advocate that we should be extra cautious in Russian agricultural investment.