CONFIRMED: Russia to have record harvest in 2017

Brushing aside early year setbacks, record harvest confirms Russian food output continues its surge

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

At a meeting between President Putin and two of his top ministers – Economics Minister Oreshkin and Industry Minister Manturov – Oreshkin confirmed to Putin that contrary to earlier expectations Russia’s harvest this year will be greater than last year’s, and will be a post Soviet record.

Economic Development Minister Maxim Oreshkin:

Thank you very much, Mr President.

If we take a look at the latest statistics, in August GDP growth stood at 2.3 percent, it dropped below 2 percent in July, agriculture looked bad, mainly due to the weather, of course. What we see in August, the good weather in August and September will help to compensate for the July drop.

Vladimir Putin: It looks like we will have another record harvest.

Maxim Oreshkin: Yes, because the beginning was not very good, but now we have ideal conditions for harvesting. The yields are at the same level as last year, and the losses have dropped considerably.

The drop in expectations for the harvest in July may have been the proximate cause for the surprise slow down in the rate of industrial growth that month.  This appeared to conflict with the strong PMI figures and the continued growth in investment.  Industrial growth however began once again to put on speed in August, when harvest prospects improved, suggesting that the two figures are linked in some way.

The dramatic growth in food production in Russia over the last three years is a direct result of government policies to support agriculture of which the well-known counter-sanctions banning most food imports from the EU are only one.  I would add that in terms of overall output the most valid comparison is not with the Soviet years – when output peaked at similar levels to today’s – but with the demoralised state of Russian agriculture in the 1990s and early 2000s, when by comparison with Soviet levels output had collapsed.

What is true to say is that the Soviet system of fixed prices caused the Soviet food distribution to become increasingly dysfunctional and wasteful, leading to shortages of food items in shops and the need for food imports at a time when food was actually being produced domestically in quantity.  By contrast today, when food prices are determined by supply and demand, the food picture in Russian shops is one of abundance.

What is also true to say is that because of the system of fixed prices and the USSR’s centralised collection and distribution of food, the Soviet agricultural and food distribution system was very brittle.  Suffice to say that it would have been unlikely to rebound back strongly from the sort of weather related setback Russian agriculture experienced earlier this year, with the result that similar weather conditions would have led to a depressed harvest for the whole year.

By contrast today’s far more flexible Russian agricultural and food distribution system, in which prices are not fixed by the government but are determined by supply and demand, and where food distribution takes place according to commercial criteria and not through centralised allocation, has brushed off the weather setback earlier this year with no difficulty.

Needless to say comparisons of today’s Russian food industry with that of the tsarist era are invalid, since social and economic conditions in Russia today are so different from what they were then that meaningful comparison between the two systems is impossible.

The fact that Russian agriculture has been able to rebound so strongly from its earlier difficulties this year is a sign of its growing strength and resilience.  With abundant land, competitive labour costs, an efficient distribution system and vast export possibilities, the stage is set for Russian agriculture to attract the high investment it needs to continue its rapid growth, enabling it soon to leave the peak Soviet levels it has now achieved far behind it.


The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

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