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St. Petersburg State Polytechnical University Journal. Economics no. 5(204) 2014
UDC 338.2 : 338.43
R.A. Lugovskoi RUSSIAN STATE POLICY OF FOOD SECURITY
Р.А. Луговской
ГОСУДАРСТВЕННАЯ ПОЛИТИКА ПРОДОВОЛЬСТВЕННОЙ БЕЗОПАСНОСТИ РОССИИ
The article considers the Russian state policy in the field of food security of the country. The analysis of the actions taken by the public authorities, to ensure the independence of Russia from the Western food supply. The situation and proposals for the development of food security in Russia was studied.
STATE POLICY; PLANNING; STRATEGY; STATE MANAGEMENT; FOOD SECURITY.
Рассмотрена государственная политика России в области обеспечения продовольственной безопасности страны. Проведен анализ действий, предпринятых органами государственной власти для обеспечения независимости России от западных поставок продовольствия. Изучена сложившаяся ситуация и подготовлены предложения по развитию продовольственной безопасности страны и регионов России.
ГОСУДАРСТВЕННАЯ ПОЛИТИКА; ПЛАНИРОВАНИЕ; СТРАТЕГИЯ; ГОСУДАРСТВЕННОЕ УПРАВЛЕНИЕ; ПРОДОВОЛЬСТВЕННАЯ БЕЗОПАСНОСТЬ.
Today Russia, our country, is not able to feed its own population with domestic products, even with basic ones- bread, meat, fish, etc. Almost all food products that we can see on shopboards of groceries are often made from foreign raw materials [1, 2]. Despite these facts, Russia became a member of the WTO on 22 August, 2012. Russia's entry into the WTO has always been observed from different viewpoints, both positive and negative.1
Nevertheless, it is clear that climatic and other features, from the macroeconomics point of view, justify production of any product in the country with its lowest cost, but do not take into account political and other factors. This leads to the relevance considering the food security issue and the need to resolve this problem on a nationwide scale.
1 WTO — is an international organization which was created on January 1, 1995 for the purpose of international trade liberalization and regulation of trade and political relations between the member states. Objectives of the WTO — the establishment of general principles of international trade: equality, reciprocity in decision-making, transparency of decision-making, the existence of liabilities and the ability to impose restrictions (for example, only for products that do not impair the environment or are salubrious, etc.) [3].
Thus, we set ourselves the following main tasks:
— To analyze the food security of Russia with regard to imported products.
— To identify the global trend of food consumption.
— To review the existing legislation of the Russian Federation considering food security.
— To determine the approaches to tackle Russian food security problems.
Let us remind that the most prolific year for meat in the Soviet Union was 1990 — according to Rosstat data, the country consumed nearly 13 million tons, with 10 million tons of domestic products. Since then meat production in Russia has been steadily deteriorating (the worst indicators were shown in 2000). Since 2001, the consumption of meat has begun to grow together with the amount of import [4].
Also note that a number of other food products that are present on shopboards and labeled as «Made in Russia» are, in fact, not domestic.2
2 For example, cucumber «Pickles», which can be found in retail outlets, are actually grown in China and only canned in Russia. Another example — are some meat products, which are in fact made of imported meat.
Of course, we have always bought imported meat, even in the period of the Soviet Union. However, we used to buy less (—1.5 million tons per year in 1980, and 3.17 million tons in 2007—). According to «Meatland Food Group», in 2009 about 70 % of the St. Petersburg market was taken by imported meat products, including the poultry, 70 % of which was domestic. Nearly all sausage products are made from the imported meat. [4] One of the reasons for such a situation is the lack of funding for stock-raising farms, the lack of effective tax and preferential arrangements.
Today, our meat market is diversified. It was originally a thought-out policy to buy meat from different countries at the same time. The reason is that the meat from one of the countries may one day no longer meet our internal requirements in response to changing conditions and requirements. In that case, the procurement is effected throughout the New World and partly in the Old World.
However, some experts believe that Russia is quite capable of almost overfeeding its citizens with meat [2, 4, 5].
After the global financial crisis the world economy faced a more serious problem, referred to as the new term «agflation» — the rise of prices for agricultural commodity. Dramatically increased prices for food products are forcing the biggest exporters to restrict supplies to the world market in order to reduce inflation in their own. In 2007—2008 experts have already predicted the oncoming food crisis.
Experts see the reasons for a sharp increase in food prices in two main mutually influencing circumstances: energy price hike, which makes up a significant share in food production expenses and the increase of food consumption in India and China.
In Russia, in August 2014, the Federal Antimonopoly Service began checking the validity of the rise in fuel (energy) prices, which have grown almost simultaneously in 56 regions of the country [6].
The rapid development of the economic well-being in the most populated countries of the world also increases the demand for energy resources, which they do not produce. In addition, the Indians and the Chinese have begun to consume more pork and dairy products, which sharply reduced the availability of these products in the market. Droughts and
ethanol production reduced world food supplies more substantially. A tremendous amount of corn and other crops is required for the production of a new type of fuel, therefore the number of fields planted with corn used for food production in the world was drastically reduced.
Experts saw the need for changes after many countries had begun to experience serious food shortages3 [7].
The World Bank even drew attention to the need for a «new course» in the global food policy: to help poor countries in short term, and to develop competitive agricultural production wherever possible in a long term.
It is not possible to develop agriculture immediately, so among those who announced food blockade or limited food exports were such major suppliers as India, China, Egypt, Thailand, Vietnam. Of course, productivity increases and falls from year to year cause embargo and its cancellation on different types of food supplies.
Globalization, which is aimed at the creation of the market with equal opportunities for all, with shared resources, shows the inconsistency so far. American farmers, who received in 2007— 2008 Government subsidies of about $ 119 billion, reduced the cost of agricultural commodities dramatically, forcing manufacturers in other countries to shut down their production due to low profitability and inability to compete with the Americans. This conflict has already been a problem of the WTO members negotiations on agriculture [7].
In Russia, the food situation is relatively stable, for example, in Moscow food stocks at wholesalers should be enough for at least three months of autonomous existence (in St. Petersburg — not less than two months), in addition in nearby areas since 2008 agricultural holdings are being created to provide the transition to self-sufficiency in food. Nevertheless,
3 Series of protests in 1990s against such sharp increase in food prices took place in Haiti, Egypt, Afghanistan, Bolivia, Yemen, Mozambique, Indonesia, Senegal, and in several other countries. Destabiliza-tion of the political and social situation in dozens of countries from Asia, Africa and Latin America is a serious threat to all market economy in the world: production of different products is reduced, because there are factories of many large companies in these countries, and general inflation is increasing.
^st_Petersbuigstatejpoiytechnicai^niveisjtyJouinai-Econom^no- 5(204) 2014
UN oiiicials pay attention to significant territories of vacant fertile land [7].
The Russian President signed a decree No. 120 «On approval of the Food Security Doctrine of the Russian Federation» on January 30, 2010 (hereinafter — the Doctrine) in order to implement the state policy in the field of food security of the Russian Federation, aimed at providing the population with food supplies, the development of domestic agricultural and fishery complexes, rapid response to internal and external threats to the stability of the food market, effective participation in the international cooperation in the field of food security [8, 9].
On the basis of the Doctrine, the Russian government should develop and adopt a plan of actions to implement the provisions of the Doctrine and prepare reports to the President of the Russian Federation containing the analysis, evaluation and forecast for food security. Public authorities have already developed a number of programs in this area, here are some of them:
— The Order of the Government of the Russian Federation of 03.07.2014 No. 1215-r «On Approval of the Concept of development of domestic food aid in the Russian Federation»;
— The Order of the Ministry of Agriculture of Russia of 23.05.2014 No. 166 «On approval of the branch program «Development of the milling industry of the Russian Federation for 2014— 2016»;
— The Order of the Ministry of Agriculture of Russia of 23.05.2014 No. 170 «On approval of the branch program «Development of the oil and fat industry of the Russian Federation for 2014— 2016»;
— Government Decree of 15.04.2014 No. 314 «On approval of the state program of the Russian Federation «Development of the Fisheries Industry»;
— Government Decree of 15.04.2014 No. 315 «On Amendments to the State Agriculture Development Program and the regulation of agricultural products, raw materials and food for 2013—2020»;
— Government Decree of 15.04.2014 No. 328 «On approval of the state program of the Russian Federation «The development of industry and increase of its competitiveness»;
— Government Decree of 12.10.2013 No. 922 «On the federal target program «Development of
agricultural land reclamation Russia for 20142020»;
— Government Decree of 15.07.2013 No. 598 «On the federal target program «Sustainable Development of Rural Areas for 2014—2017 and for the period up to 2020»;
— Resolution of Chief State Sanitary Doctor of the Russian Federation of 09.07.2013 No. 33 «On supervision over production and sale of milk and dairy products» and others.
The Doctrine also provided further Russia's accession to the WTO under terms consistent with the national interests of the Russian Federation, which should contribute to food security of the country, according to the plans of its authors.
Among the indicators of food security in the Russian Federation and the criteria for their evaluation a system of indicators to assess the state of food security in three areas is highlighted: in the sphere of consumption; in the production and national competitiveness; in the sphere of management.
The important point for the assessment of food security as a criterion is the specification of the share of domestic products for various product groups (Tab. 1):
Table 1
Specification of the proportion of domestic products for various product groups
grain — not less than 95 % fish products — not less than 80 %
sugar — not less than 80 % Potato — not less than 95 %
vegetable oils — not less than 80 % edible salt — not less than 85 %
meat and meat products (in meat equivalent) — not less than 85 % milk and milk products (in milk equivalent) — not less than 90 %
The Doctrine is necessary for effective socioeconomic development of the country and regions in which attention is paid to the internal and external factors that may affect the country's food security [8—10].
Immediately after the adoption of the Doctrine in 2010 a serious drought happened in Russia, which resulted in severely affected crops. However, even in these conditions, neighboring Belarus managed to completely provide itself
with food grain, while in Russia the crops were destroyed due to the abnormal summer heat, that could be the evidence of possible illiterate actions of domestic agricultural producers [11].
Next, we need to analyze the situation with the production and consumption of certain types of products in Russia.
Consider Tab. 2, which contains data on the yield of some crops in Russia.
As we can see from Tab. 2, grain yield has virtually not increased over the last 3 years, except for corn. Potato yield has not changed much, and vegetables declined slightly. We now move on to Tab. 3.
According to the statistics, we can see the actual growth of meat production. This year, according to the Russian Minister of Agriculture Nikolai Fyodorov, the country can overcome one hundred million's milestone for the production of grain [12].
Our country has 20 % reproducible fertile lands of the world with 55 % of the world reserves of natural humus, 20 % of freshwater resources. The Value of these resources exceeds the reserves of our non-renewable hydrocarbons several times. Accordingly, in certain circumstances, Russia is able to increase the production of cheap food products dramatically and start selling food rather
Table 2
Crop yields in the Russian Federation (in the agricultural organizations; quintals per hectare of harvested area)*
Grainsandlegumes 2011 2012 2013 2012/2011 2013/2012 2013/2011
Wheat 23,5 18,7 23,4 79,57 % 125,13 % 99,57 %
Rye 19,9 15,2 19,4 76,38 % 127,63 % 97,49 %
Barley 23,1 19,6 20,3 84,85 % 103,57 % 87,88 %
Oats 18,6 14,7 16,9 79,03 % 114,97 % 90,86 %
Graincorn 44,7 43,5 51,9 97,32 % 119,31 % 116,11 %
Millet 14,6 10,9 12,6 74,66 % 115,60 % 86,30 %
Buckwheat 10,0 7,9 9,6 79,00 % 121,52 % 96,00 %
Rice 51,8 55,5 50,3 107,14 % 90,63 % 97,10 %
Legumes 17,4 13,6 12,6 78,16 % 92,65 % 72,41 %
Total Cereal 223,6 199,6 217 89,27 % 108,72 % 97,05 %
Potatoes 196 182 198 92,70 % 108,70 % 100,77 %
Fieldvegetables 254 234 234 92,13 % 100,04 % 92,13 %
* According to the Federal State Statistics Service as of 24 March 2014. URL: http://www.gks.ru/wps/wcm/con nect /rosstat_main/ rosstat/ru/statistics/efficiency/#
Table 3
Production of livestock per 100 hectares of agricultural land in the agricultural organizations
of the Russian Federation**
Groups of goods 2010 2011 2012 2011/2010 2012/2011 2012/2010
Livestock and poultry for slaughter (live weight), tons 5.0 5.4 6.1 109.04 % 112.97 % 123.18 %
Milk, tons 11.7 11.8 12.2 101.11 % 103.53 % 104.68 %
Eggs,*** thousand pieces 97.7 99.2 102.0 101.50 % 102.86 % 104.40 %
** According to the Federal State Statistics Service as of 14 May 2014. URL: http://www.gks.ru/wps/wcm/ connect/rosstat_main/ rosstat/ru/statistics/efficiency/#
*** Based on 100 ha of sown area of grain and leguminous crops
^^t.^eieisbur^^t^^^oiytechin^^^n^eis^yJoui^^^^coi^om^sn0' 5(204) 2014
than hydrocarbons. However, in 2014 the share of imported food in Moscow makes more than 80 %. Positive indicators for beef are not observed, as well as for dairy products, import of which makes about 8.5 million tons of milk. Fish production of domestic origin is 70—75 %, while imports — 25—30 % [12].
Among advantages, we can distinguish the grain production and consumption. So, we consume an average of about 70 million tons of grain per year. In 2013 the country harvested 92.4 million tons of grain. Grain is exported to Egypt, Turkey, United Arab Emirates. Incidentally, the Egyptian revolution in 2011 played its own role for the embargo on grain exports imposed by Russia after the «unprecedented» drought, during which, as we have noted, Belarus produced 100 % of the grain for their own consumption [11, 12].
Due to the purposeful policy of the Russian Government, cheap loans for agricultural producers and agribusiness (2/3 of the Central Bank rate), today the share of imports in Russia is only 10 % of poultry (in 2013 produced 3.8 million tons against 700 thousand tons in 1999) and 25 % of pork (in 2013 produced 2.8 million tons against 1.57 million tons in 2005). For other products — according to Rosstat, Russia
produces 4 million tons of vegetable oil annually, mainly sunflower. This is twice as many as in 2003. Export of vegetable oil is impressive — about 1.5 million tons (mainly in Turkey and Egypt). Egg production has increased (41 billion pieces in 2013 against 36.6 billion in 2003, domestic consumption — 39 billion pieces), however, in the last three years stagnation has been observed a in this industry [12].
Despite the outwardly optimistic figures of physical volumes, the price structure of Russia's foreign trade in food production is not rosy. A characteristic feature — export of goods with low added value (the so-called soft commodities — agricultural raw materials like wheat) and imports of niche products of high quality. For example, Russian export of wheat — mainly supplies of cheap, often forage varieties to Egypt (exception — a high-quality wheat of Altai), imports — expensive wheat from France and Canada. As for fish — raw materials are exported, and expensive kinds of fresh fish, mainly from Norway and Chile are imported.
Note that the main success is mainly due to interest rate subsidies on loans from the budget.
Some pictures of Russia's dependence on imports can be seen in Tab. 4 [2].
Table 4
Russia's dependence on foreign products to certain groups in 2013
Product (thousand tons) in 2013 Production Import Export Consumption of the population Self-sufficiency
Sunflower oil 3284.0 18.1 570.0 7925.0 1.71
Buckwheat 834.0 1.5 61.0 560.0 1.49
Wheat 52091.0 1086.0 13798.0 35500 1.47
Rye 3360.0 0.1 47.0 2600 1.29
Eggs 41300.0 150.2 510.2 39500.0 1.05
Potatoes 30199.0 506.0 41.0 30304.0 0.99
Milk 30700.0 266.8 21.8 34775.0 0.88
Poultry 3816.0 523.0 53.0 4368.0 0.87
Onion 1985.0 306.0 1.3 2289.0 0.87
Carrots 1605.0 266.0 0.1 1971.0 0.86
Sugar (whitebeetroot) 4400.0 443.2 5.0 5350.0 0.82
Pork 2829.7 601.0 0.3 3836.0 0.74
Beef 1632.2 581.6 1.2 2342.0 0.70
Note. Consumption — excluding industrial consumption. Self = production / consumption. According to Rosstat, Ministry of Agriculture, the Federal Customs Service, the National Meat Association, the Institute for Agricultural Market Studies.
Dependence on imports is unlikely to be overcome for additional reasons. True proportion of imports in agricultural products is higher if the entire production chain is taken into consideration. It is clear that today we need to revive the scientific school of plant breeding and genetics, and agriculture, which is closely linked with industry in turn.
Unfortunately, according to some experts, up to 80 % of the seed potatoes in large holdings are imported, plant protection products (pesticides, herbicides, fungicides) — are imported by almost 100 %. 90 % of the active ingredients for producing pesticides, herbicides, fungicides on Russian chemical plants, are purchased abroad. Vegetable seeds are almost all imported. Greenhouse industry is 100 % imported[2].
Despite the claims of the Government of the Russian Federation that import from the West will not harm Russia, the opposite is becoming increasingly evident. For example, Kaliningrad region is already concerned about potato yields in the next year and drew attention of the Ministry of Agriculture of the Russian Federation on the shortage of potatoe seeds and the need for their procurement in the European Union. The Ministry of Finance is also beginning to recognize the damage caused by the sanctions of the West. In particular, the main concern is the payment for loans from foreign countries and the making money transfers of the Russian companies on the international level. [13, 14].
Note also low numbers and quality of domestic production and agricultural machinery, which leads to the need to acquire it abroad, which is better. Imported equipment, even from neighboring Belarus, often breaks down less often than the domestic one.
Thus, with some of the main products — grain & potatoes — we do provide ourselves completely or almost completely, and with other products and raw materials — we don't. On the one hand, we can direct the surplus of grain not for export, but for the development of the livestock — for forage, but on the other hand, we are integrated into the global economy, which does not let us do this (we must export, that is, we need to increase the production of grain).
If we imagine that the West today stops the delivery of products to Russia, admirers of exotic food and delicacies will be the first to suffer, stock of specific products will last for several
months, and then the country will need help from Asian countries.
It is obvious that our country needs a few years to create its own food security,, which it may not be enough.
Industry and trade must be socially oriented — so government support should be aimed primarily at the poultry production — it is cheap, and pork — it is technological. We need to develop our farms for the production of beef and milk, increase the cultivation of apples, revive the vineyards and other crops that may be grown in our country.
The Federal Law of 28 June 2014 No. 172-FZ «On the strategic planning in the Russian Federation», in our opinion, does not properly take into account the strategy for food security, whereas it is included in some way in the «National Security Strategy» referred to in the law.
In our opinion to resolve the food security problem in Russia, it is also necessary to take a range of measures. Firstly, we need to modify the system of social and economic planning throughout the country. This requires implementation of complex, interrelated actions in various fields [15—18]. Secondly, we need to develop the industry in the country, so we can use its agricultural equipment, as well as modern equipment for the production of semi-finished products and alike. Thirdly, the state support to farmers and a ban on the use of agricultural land for other purposes is needed, as well as assistance in their development, including the attraction of private farmers. Fourthly, it is necessary to decrease the fares for fuel and energy, and power plants need total renovation. Fifthly, the establishment of state trade enterprises with a market share of 5—10 % will allow the Russian government to restrain retailers with market mechanisms, as well as provide personnel in the field of trade. Finally, it is necessary to revive the system of training in this area, including increased funding for a number of SRIs for providing safe and high yielding crops.
Strategic food security is possible even if we are isolated from the Western countries. If we are going to produce not only potatoes and bread, but also meat in its diversity (poultry, pork, beef), a variety of grains, fruit, including apples, pears, grapes, berries and vegetables: onion, tomatoes, cucumbers, cabbage, etc., we will feed the population.
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St. Petersburg State Polytechnical University Journal. Economics no. 5(204) 2014
Schematic representation of Russia's food security
The general scheme of Russia's food security can be represented in figure.
In figure we have tried to reflect that in an ideal case, Russia should produce 100 % food for their own needs (which may be produced in Russia taking into account the climatic and other characteristics), but can actually produce even more than 100 %. Taking into consideration that the Russian economy is integrated into the Global economy, exports are inevitable. Thus, the ability of Russia to export 20 % (this figure may change) food from 100 % + surplus in excess of 100 %, is shownas an example. Thus, Russia has 80 % of food for its own needs. Accordingly, we need to import 20 % of food products. But, in the case of foreign conflict, Russia will not be able to export their food and will send it to the domestic market, thereby ensuring food security.
The fact that Russia exports a number of products, even those which cannot be produced 100 % domestically, is unacceptable. For example, Russia exports fish and sugar, despite the fact that it is not enough for their own
needs. The Increase of production up to 100 %, or slightly more than 100 % will allow painless export for the country, in addition, in the case of military or political conflicts, our state would be sure it is able to feed its population. For example, Russia produces grain more than 100 %: 100 % of the grains we consume themselves, and the surplus safely sell or directed for animal feed. The question, if it is possible to exceed the threshold of 100 % of its own production and to which extent, is controversial and requires further study, but it is clear that the level of overproduction should be small, so that in case of any sanctions, decline in production would not strongly affect the development of the economy, as well as the level of unemployment. But even if Russia cannot provide 100 % production of food products because of external reasons, it is necessary to own enough strategic resources to increase food production up to 100 % within a year.
State food security policy must create the conditions of self-sufficiency and independence on external factors.
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LUGOVSKOI Roman A. — St. Petersburg state University of trade and Economics. 194021. Novorossiyskaya str. 50. St. Petersburg. Russia. E-mail: rlugovskoy@yandex.ru
ЛУГОВСКОЙ Роман Андреевич — доцент кафедры менеджмента Санкт-Петербургского государственного торгово-экономического университета, кандидат экономических наук.
194021, Новороссийская ул., д. 50, Санкт-Петербург, Россия. E-mail: rlugovskoy@yandex.ru
© St. Petersburg State Polytechnical University, 2014
