NATALIA SHAGAIDA: “LOW EFFECTIVE DEMAND DOES NOT ALLOW AGRICULTURE TO DEVELOP”

Against the backdrop of the general recovery growth across the Russian economy, agriculture appears to be almost the only sector that has been experiencing a decline. Over the first eight months of this year, the output of goods and services by basic economic activity type increased by 6.4% on the same period of last year. Industrial production gained 4.5%. Retail turnover rose 8.8% on the disastrous year 2020. And only the output of agricultural products fell by 3.4% in value terms. At the same time, agricultural producer prices were almost 20% above last year’s January-August prices. Retail food prices increased by more than 8%.

“There could be multiple reasons for the production reduction. As far as meat is concerned, it is the low effective demand that primarily hampers any increase in production and development,” Natalia Shagaida believes. At the same time, she thinks that the potential of Russian producers for exporting their meat is still limited.

“On average, the actual meat consumption level is already within the rational norms, and even above these norms. But that is just on average. And in reality, there are still significant population groups with insufficient income whose meat diet is much more modest than the average,” the expert said. She thinks that this situation could be corrected by introducing special food benefits for the vulnerable groups. With such support, low-income citizens could increase their meat purchases, thereby boosting meat production.

According to Shagaida, “In Russia, eggs represent an affordable, valuable, and quite competitive food product by comparison, say, with world prices. Eggs in Russia enjoy a significant margin of competitiveness, unlike many other livestock products.” However, in her opinion, producers find themselves caught between the devil and the deep blue sea, that is, between the rising grain

prices, the growing prices for import components, and low consumer incomes. “The consumer reacts very badly to rising prices. It is just surprising that egg producers have cut their production relatively little, and this happened against the backdrop of bird flu outbreaks,” she added.

Milk production in this country demonstrates practically no growth, in spite of the impressive success achieved by agricultural organizations in terms of milk yields, and by private farms in terms of production growth.

So far, there are no reasons for any particular fears in connection with the agricultural production decline. “Russia basically produces a lot more foodstuffs than it consumes. Last year was better in terms of weather conditions, the year 2021 is slightly worse, but is still quite good,” the expert believes. The export restrictions, she said, have not yet led to a reduction in crops. “Despite the restrictions, the production of grain and vegetable oil remains an attractive activity, and their production is not going to be deliberately reduced,” Shagaida predicts.