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Sanctions can’t slow Russian agriculture

Sanctions could have spelled disaster for Russia. With their implementation in 2014, Russian consumers were cut off from food supplies from the world’s second biggest agricultural power – the EU.

Prices soared, and some fruit and vegetable favourites were no longer available on Russian supermarket shelves.

Three years down the line, Russia’s agricultural industry has risen to some tough challenges and kicked into overdrive.
 
Through heavy government investment, purchasing of updated farming equipment and machinery, and good old fashioned hard work, Russian output of key agriproducts is reaching record levels – suggesting more cash to splash on cultivation and growing equipment and machinery has appeared in the wallets of Russia’s key agribuyers.


Russia grows more food


Russia has long held enormous potential for farming. Years of inefficiencies, during both Imperial and Soviet eras, hamstrung the world’s largest country agriculturally, but it looks like those days are over. 2016, under the influence of food embargos, might have been the year Russia realised its farming promise.

Russia grew 5.4 million tons of fruits and vegetables domestically that year – a 2% increase against 2015’s levels. Wheat, of which Russia is on course to export around 40 million tons worth in 2017, also rose significantly too.
 
A total of 119 million tons was produced in 2016 – a new post-Soviet record.

Construction of greenhouses, particularly in the Arctic and Far East, means Russians can now cultivate products previously incapable of being grown there; citrus fruits, tomatoes, and so on. Greenhouse-based production was 31% higher during 2016 than previous years – reaching in excess of 600,000 tons.


Russian agriculture gets more profitable


Coinciding with Russia’s food ban, the rouble took a slide in value in 2014. While this caused some economic tsunamis, and Russia entered recession, this actually meant agroholdings and farmers could potentially achieve higher profitability.

How? First, prices of land dropped, meaning majors could snap up high acreages at discount prices, and turn them into productive sites. Elsewhere, prices of fuel and fertilisers also dropped too.

Andrey Guriev, CEO of PhosAgro, a leading Russian fertiliser manufacturer, said the roubles devaluation created a “fantastic pricing environment for anything agriculture can produce. In one day, the Russian agricultural sector became as profitable as hell”.

Government subsidies, clocking in at $2.9 billion in 2016 with a $240 million bump coming in 2017, have put more money in farmers’ hands. Lower overheads coupled with higher output is pointing towards higher profits for Russia’s farming community.
 
That means international suppliers of farming and food production machinery and equipment should be keeping their eyes firmly fixed on the Russian market.
 

Demand for agricultural machinery to grow


22% of Russia’s agricultural equipment is imported. Roughly half of all such machinery used in Russia was made by a foreign manufacturer too. 21,000 units of farming-related equipment is expected to be purchased by 2017’s end – double the amount purchased in 2016.

But that’s not all. Consumption of crop chemicals and fertilisers is expected to grow alongside Russia’s agricultural output. Use of these products rose 16% in Russia over the previous year – almost eight times higher against global growth of 2.2%.

The need for modern farming, processing, and production equipment and machinery will remain high in Russia while sanctions last and food import substitution remains a major policy.
 
If your business can supply the in demand products and solutions, then be sure to exhibit at one of ITE Food & Drink’s agricultural events – including YugAgro, Russia’s chief agricultural farming exhibition.

Need more info? Contact our team here.

 

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