June 8, 2009

Russia, whose agricultural potential is still unrealized after the fall of the Soviet Union, has launched a drive to increase its share of the global grain market by doubling exports.

 

Russian President Dmitry Medvedev this weekend hosted a world grain forum in his home city of Saint Petersburg, promoting Russia as a major player in agriculture and warning that hunger remains a global problem.

 

"In the next 10-15 years we are planning to bring the volume of Russian grain exports to 40-50 million tonnes, increasing our share of the global market to 20 percent," said Agriculture Minister Yelena Skrynnik.

 

"Russia isn't only about gas, oil and metals. We also have great grain resources," she said.

 

Last year, Russia exported 20 million tonnes out of a total of 108.4 million tonnes of grain harvested.

 

But while Russia has become one of the world's main grain exporters and is now one of the top three exporters of wheat thanks to bumper harvests, the full potential of its vast agricultural lands remains unfulfilled.

 

Russia has tens of millions of hectares of chernozem (black earth), an ideal soil because of its richness in humus, which is formed by the decomposition of plant matter by micro-organisms.

 

The high humus content gives the soil an ability to retain moisture that makes it perfect for farming. The famous Black Earth region in the southwest of Russia covers an area approximately half the size of Germany.

 

But the fall of the Soviet Union led to vast tracts of arable land going fallow.

 

Ex-Soviet states have lost 24 million hectares of arable land - three quarters of it in Russia - since 1993, said Dmitry Rylko, head of the Russian Institute for Agricultural Market Studies.

 

He added that by contrast 31 million hectares of arable land had been gained elsewhere in the world.

 

"The Soviet authorities exploited a large part of the arable land but in a completely unproductive way," he said, adding that the fall of the USSR led to a dramatic decline in demand and support in the sector.

 

Medvedev said that Russia would now be preparing cultivation of 20 million hectares of farmland that have fallen fallow since the Soviet collapse.

 

Skrynnik proposed creating a "grain pool" alongside fellow major ex-Soviet agricultural producers Kazakhstan and Ukraine which could take a 30-35 percent global market share.

 

"The creation of this pool would allow us to reduce the volatility of prices on the global grain market as well as dependence on speculative factors," she added.

 

Ukraine's Agriculture Minister Yury Melnik said Ukraine would harvest 42-43 million tonnes in the current year but that this could rise to 80 million in the future.

 

However, Russia's ascent as a major player in the global grain market is unlikely to come without bumps.

 

Egypt, a major buyer of Russian grain, has ordered the return of a shipment of Russian wheat worth US$9.6 million on the grounds it contained excessive levels of insects and heavy metals.

 

"We only send grain of quality. This isn't linked to us," commented Russia's Deputy Prime Minister Viktor Zubkov.

 

Rylko said the main challenge for the Russian authorities was to develop infrastructure like grain silos which are insufficient and often of bad quality.

 

The slowdown has again highlighted the importance of the most basic of food exports, with the UN's Food and Agriculture Organisation (FAO) saying the number of the world's starving will increase drastically because of the crisis.

 

Medvedev first proposed holding the grain meeting during a Group of Eight summit in Tokyo last year and also urged countries to agree mechanisms to address imbalances between grain supply and demand.