Economic situation in Russia requires agricultural producers and processors to switch to the strategies of production efficiency and sales growth
The agricultural complex development is one of the priorities of the social-economic policy, meanwhile the formation of the effective competitive agricultural production is the main task of the economics development in the world. What economical policy is being held in Russia to date will tell us the Senior Expert of the Center of Economical forecast of GasPromBank Darya Snitko.
- Agricultural complex is one of the most important industries of economics in the world. How does the current situation in Russia impact on the agriculture of the country?
Agricultural complex share in GDP of Russia totals just only 3.9%. In 2014 we expect the growth slowdown for the real incomes of the population which will impact the demand stagnation for food, meat and by-products and new market development. Ruble devaluation which was in the beginning of 2014 will mostly have the positive influence on the agricultural complex: import costs increase to fasten its replacement, improve the price situation for pork and poultry producers, improve the competitive positions in exports – oilseeds and grains complexes. The same factors to impact the investment demand of agriculture in 2014: import equipment prices rise to hold modernization processes, meanwhile global prices rise temps slowing will make the companies to reconsider the investment programs.
- What are the major difficulties in agribusiness realization in 2014?
The major problem of industry in 2014 is the population incomes temps slowing. In agroindustrial sector of the Russian Federation in 2005-2013 there was the income of the significant investments into the production development oriented on the domestic demand, and the enterprises reaching the projective capacity will work under the conditions of realization of rather moderate price and market scenarios. Despite the import appreciation the domestic food market will not be able to react the traditional violent rise of prices: the food-networks purchasing policy is getting harder due to the low profitability of retail and close attention of controlling services. Besides rather actual issue to Russian companies is the work in the conditions of currency volatility.
- What industries of agriculture should be invested in first of all?
While the State program on the agriculture development was active there were the active investments into live-stock segment of the market: poultry and hog production. Thus there was formed the domestic consumption demand for grain and oilseeds by-products. At the same time the investments into plant-production sector were low. But it can be improved owing the implementing of more effective agricultural technologies and management. Unfortunately the level of the consumption products markets and trade in regions development, and also the competition with foreign goods used to hold the investments of the processing industries. In 2014 we do not expect the appearing of the new drivers for investments intensification.
- Will the Ruble fluctuation impact on the agricultural commodities production profitability in 2014?
Of course the higher exchange of USD and EUR to Ruble will impact on the income of the agricultural commodities sellers, exporters first of all. At the same time note the global prices for grains and oils which are the main products of the Russian agrarian exports to decrease in comparison to the last year level which will certainly influence the profitability rate. At the same time there is no impact expected for costs of enterprises because the essential share of imports is taken by the markets of plant protecting agents and hybrid seeds.
- Did you notice the prices increase for the main materials and equipment in the eve of spring works?
Russia is the importer of plant protecting agents (nearly 25% of the market), hybrid seeds (sugar beet, sunflower) – the costs for the stated materials to increase due to the currency exchange. On the market of fertilizers the price formation depends on the global market, but not directly. Prices formation for raw-materials – phosphates, potassium muriate – is being under the net-back principle, i.e. the price formula for the domestic sales depends on the global market ones, meanwhile other costs – for the complex fertilizers production – are Ruble ones.
- What kinds of state support to be actual and necessary in the agricultural industry in 2014?
The market players are interested in the soonest solving of issue on the payments of subsidies on the approved loans by the commission of the Ministry of Agriculture.
- What economic difficulties will the agrarians, processing enterprises and traders face till the end of the season?
The market players to face the necessary of correction of the work strategy on the market due to the growing volatility of the currency exchange. It is the situation when there are applied the hedging instruments of currency risk, long-term contracts work with between the raw-materials producers and processors.
Interviewed by Evgenia Severina
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