Before discussing the current situation in the agro-industrial complex of the Russian Federation, it is necessary to clarify that this sector of the economy has certain specifics. Thus, the resources of agriculture are land, plants and animals, so its functioning is biological in nature.
Production processes in this sector are seasonal in nature, resulting in uneven use of labor throughout the calendar year, as well as an undulating flow of agricultural produce to markets and the perception of financial income by companies.
In addition, it is worth paying attention to the fact that the products from the activities of the agro-industrial complex are irreplaceable. State food security therefore largely depends on the efficiency of the agro-industrial complex.
The functioning of the agro-industrial complex of the Russian Federation should be considered in the context of two main branches of agricultural production: crop production and animal husbandry. If we talk about agricultural production, it currently accounts for more than half of the total value of agricultural production in the country.
Thus, the Russian Federation easily ranks first in sugar beet production, second in sunflower production, and third in wheat and potato production. Russia also occupies a leading position in many types of livestock products. For example, our country ranks fourth in terms of total meat production, just behind China, the United States and Brazil. Moreover, the Russian Federation was in seventh place in milk production.
2022 has greatly influenced the state of the national economy. Against the backdrop of the global geopolitical crisis related to the situation in Ukraine, many industries have faced serious challenges, some of which have yet to be overcome. The agro-industrial complex of the Russian Federation was no exception in this regard.
The most important issue for representatives of the agricultural sector in Russia was the disruption of global supply chains that developed during the economic activity of agricultural enterprises. The food industry is extremely vulnerable to foreign supplies of special equipment, fertilizers, packaging, consumables, which for some items can reach 70-80%. National companies have reacted extremely harshly to any changes in the law regarding supplies under contracts already concluded.
We are talking about innovations that led to the installation of new prepayment requirements or changed the delivery time of purchased products. Even more problems arose in case of complete breach or revision of contracts, failure to meet deadlines for obtaining components for special equipment. By now, many companies have already successfully coped with the pressure of sanctions by redirecting their logistics routes to Russian-friendly states.
The new economic conditions have led to a decrease in the availability of state aid for farmers. Given the strategic importance of this sector of the economy, it is necessary that state support be systemic in nature. Endless packages of sanctions from Western countries, policy changes of the Central Bank of the Russian Federation have dealt a severe blow, which has affected the financial market and the availability of funds on preferential terms. In the new realities, many large producers were forced to reduce their investment activity, which in the future could have a negative impact on the state of agriculture in Russia.
Another problem was the tightening of state control in this industry. For example, some agricultural producers faced a situation in which the Russian authorities began to participate in determining the price of certain types of products produced by agricultural enterprises. The reason for this behavior is the fact described above that the food security of the country depends on the activities of the representatives of the agro-industrial complex, therefore, in difficult economic situations, the state tries to control their work in order to avoid a crisis. However, it should be remembered that the practice of such regulation can also lead to market imbalance.
Representatives of agro-industry also faced a problem related to a decline in the purchasing power of the Russian population. This trend eventually led to a decrease in the consumption of agricultural products, which negatively affected the financial results of agricultural enterprises. It is not surprising that this factor could affect the decline in investment activity in the industry due to the reduction in “available” cash at manufacturers.
Another challenge was the instability of the national currency. So, for example, against the background of the strengthening of the Russian ruble exchange rate, which the national economy faced in 2022, exports become unprofitable, the competitiveness of Russian products in the world agricultural market decreases. The weakening of the national currency, which we are currently witnessing, has a negative impact on companies that buy components, fertilizers and agricultural technologies abroad, since it now takes more rubles to buy them.
Based on the above facts, we can conclude that the sanctions pressure from Western states has caused considerable damage to the national agro-industrial complex. At the same time, representatives of enterprises in this sector of the economy have additional incentives and vectors for development. Given the importance and indispensability of agricultural products, the country’s authorities should provide all necessary support measures to domestic farmers, thereby ensuring the highest possible level of food security in the country.
Author: Viktor Anufriev
