Russian Agricultural Sector is Running in the Black. The Industry Accelerated Economic Growth !!!

https://www.agroinvestor.ru / Tatyana Kulistikova Agroinvestor December 2, 2019

The agricultural sector is again in the black. The industry accelerated economic growth.

Due to a good harvest, the industry accelerated economic growth in the third quarter, but overall it is still insufficient.

The economy did not slide into a recession, but slowed down again, despite the fact that this year was quite stable: the ruble volatility decreased even more, and the sanction pressure did not increase. True, the incomes of the population, and hence the demand, still did not increase. Although agricultural production will recover after a slight decline in 2018 and is likely to even overtake the pace of GDP, there are very few industry growth points against this background.

According to preliminary estimates by Rosstat, GDP in the third quarter in annual terms increased by 1.7% after 0.9% in the second and 0.5% in the first. However, the dynamics were lower than expected by the Ministry of Economic Development (1.9%). According to the results of nine months, the indicator added 1.1%, while agriculture made the largest contribution to economic growth. In the third quarter, production in the sector grew by 5.1% due to a higher crop than a year earlier. At the end of the year, GDP should add 1.3%. Thanks to a balanced macroeconomic policy, the Russian economy was kept from slipping into a recession, but the current growth rate is insufficient, President Vladimir Putin noted in mid-November. 

APK can grow by 3%

According to the results of last year, the economy increased by 2.3% versus 1.6% in 2017 and 0.3% in 2016, follows from the data of Rosstatthat were revised in March. The Bank of Russia’s official forecast for GDP growth for this year is 0.8-1.3%, although in the October bulletin “What Trends Are Talking about,” he estimated the range in the range of 0.8-1%. Until September, the Central Bank expected dynamics at a loss of 1.5%. In October, the World Bank lowered its forecast for Russia’s GDP growth by 0.2 pp to 1%, the European Commission downgraded its estimate by 0.5 pp to 1%.

Experts interviewed by Agroinvestor agree that this year the economy will add only about 1%. “At the beginning of the year, I assumed that economic growth would be approximately 0.8% year-on-year, and this estimate very accurately reflected the situation in the first quarter of 2019. But preliminary results for the third quarter indicate an accelerated pace, and now a more realistic forecast is 1.1%, ”comments Natalia Orlova, chief economist, head of Alfa-Bank’s Center for Macroeconomic Analysis. The improvement in dynamics is largely due to the situation in agriculture and to a good harvest, she adds. This year’s harvest – the second largest in modern Russia – is becoming a significant factor in economic growth, agrees the director of the VEB Research and Expertise InstituteOleg Zasov. According to him, the acceleration of the economy in the third quarter by 30% was provided by the contribution of agricultural production. Overall, annualized GDP growth is projected at just over 1%, he says. According to the Center for Economic Forecasting of Gazprombank, this year’s GDP will increase by 1.1%.

According to analysts of the Moscow Credit Bank (IBC), the dynamics of WFP this year will be at the level of 0.8-1%. The acceleration in the third quarter could provide a good application for revising the forecast that the Bank of Russia and the Ministry of Economic Development gave at the beginning of the year, but among the limiting factors are the tendency to cool consumer demand within the country, as well as the unfavorable situation on world markets, which affects the dynamics of exports. Comments on the Deputy Chairman of the Board of the Bank Alexander Kaznacheev. “The expected GDP growth this year, according to my estimates, will be about 0.9%, but do not forget that it is possible to repeat the situation of this year, when Rosstatrevised the data and GDP at the end of 2018 jumped sharply to 2.3%, ”says Maxim Nikitochkin, senior manager of the EY agricultural services group for agricultural enterprises.

Although the economy will slow this year, the agricultural sector will definitely demonstrate positive dynamics. If, according to the results of 2018, agricultural production decreased by 0.2%, then this year, according to the forecast of the Ministry of Economic Development, it will grow by 1.6% – despite the fact that initially the decrease was estimated at 0.6% (for more details on page 8) . Financial experts and analysts are more optimistic about the potential of the industry. Thus, the head of the Center for Economic Forecasting at Gazprombank, Daria Snitko, believes that taking into account the updated estimates for the grain and sunflower crops, agriculture will grow by 2.5%. “This year, the role of animal husbandry as a driver for increasing agricultural production decreased slightly, but the impact of grain and oilseeds will be higher. The latter traditionally make the largest contribution to the change in the index due to the high volatility of the production indicator ”,

Zasov predicts industry growth at 3%. Such dynamics will be achieved thanks to the collection of over 123 million tons of grain, a record production of oilseeds, as well as a high yield of sugar beets. In livestock, as in the past year, thanks to the introduction of a number of pig-breeding complexes, the main driver will be pork production, he notes. Nikitochkin expects that agricultural production will increase by 2.6% due to the significant contribution of grain. Among other growth points of the industry, she names oilseed as well as greenhouse vegetables.

Kaznacheev agrees that the production of basic agricultural products will exceed the level of the previous year, however, he does not voice specific assessments of the sector’s dynamics. “The main drivers of growth are primarily oilseed crops, which showed an increase in productivity with the potential to update the record and in exports,” he commented. “Also, the leaders in terms of production growth will be grain and leguminous plants, sugar beets, open and closed ground vegetables.” Nevertheless, in general, the agricultural sector will retain its share of 3.7-3.9% in the structure of GDP, he said.

Director of Corporate Finance, Aton Investment Company“Ivan Nikolaev also thinks that the contribution of agriculture to the economy will remain unchanged. Some changes are possible in the future for three to five years against the backdrop of the development of the agrocluster in the Far East, but even the agricultural sector itself is unlikely to radically change the picture, it will most likely have an indirect effect on the economy due to the development of infrastructure, transport and other related sectors. “The last time Russia was an agrarian country in the 18th century. Even if food export doubles, which in itself will be a huge achievement, it will still add less than 0.5% to GDP, ”he emphasizes. In the meantime, export, although growing, is mainly due to crop production and low value-added products, and domestic demand continues to stagnate or fall, as consumer incomes do not increase, says Nikolaev. 

The ruble may become weaker

One of the macroeconomic trends of 2019, Nikitochkin calls some stability of the “main” indicators: the price of oil (the price of Brent did not deviate very much from $ 62 / barrel all year), the dollar exchange rate (about 65 rubles / $ 1), and the real disposable income of the population. Some important trends have political etymology: trade wars – primarily the USA and China, leading to a huge increase in Chinese demand for Russian soybeans, to a lesser extent – dairy and meat products, the development of political and economic alliances (Russia – Africa), the opening of some Asian markets for Russian meat, dairy, grain products. “These factors will affect the Russian agricultural sector in 2020,” the expert is sure. He also mentions a decrease in the key rate and an increase in VAT from the beginning of the year from 18% to 20%. True, the latter had a slight effect on the agro-industrial complex,

The deadlock is one of the main macroeconomic trends that affected the agricultural sector this year, called the strengthening of the ruble, a decrease in the key rate and a slowdown in domestic demand growth. He also notes the maintenance of a significant amount of state support. Some of these trends will continue in 2020, but the ruble exchange rate will cease to strengthen, and its weakening is possible, the expert does not rule out.

In early November, the German publication Focus wrote that geopolitics began to affect the ruble much less than in previous years, in 2019 it significantly strengthened against the dollar and the euro and remains one of the strongest currencies in developing countries. Geopolitics still affects the national currency, just now there are no changes in it, therefore the rate does not react in any way, Nikolaev comments. In addition, the price of oil affects the dynamics to a greater extent, as well as carry trade – a strategy for making profit in the financial market due to the difference in interest rates. “By attracting dollars at 2%, placing at 8% and hedging currency risk at 5%, you get arbitration at 1%. If the rate becomes not 8%, but 6.5%, this operation will lose its economic sense, and investors will reduce their positions in Russian securities by selling the ruble. ”

In mid-November, the ruble was 6% stronger than at the beginning of the year, but in 2018 there was a strong weakening, Zasov recalls. “This year we did not observe a large-scale sanctions confrontation, so the influence of geopolitics on the course has significantly decreased,” he confirms. “At the same time, if a new wave of sanctions is implemented, we can expect an increase in capital outflows and a significant weakening of the ruble.” VEB Research and Expertise Institutedoes not predict increased sanctions. His forecast for next year assumes an average annual value of 65.8 rubles / $ 1, which will result from a decrease in the cost of a barrel of Russian oil from $ 64 to $ 57. Nikitochkin also does not agree that the geopolitical situation does not affect the course. “The dependence of the ruble exchange rate on oil prices has decreased, but any report of new sanctions immediately reduces the value of the ruble,” he draws attention. The ruble exchange rate, thanks to the budget rule, reacts poorly to changes in oil prices, Daria Snitko agrees with him. “At the end of 2019 and 2020, factors affecting the strengthening of the ruble should weaken their effect, and therefore we expect to see a moderate devaluation,” she says.

ICD analysts give an extremely restrained forecast of the possibility of strengthening the ruble, identifying the corridor for 2020 in the range of 64-67 rubles. for the dollar. “Against the background of a reduction in sanctions rhetoric in recent months, the ruble has received serious support, but the effect of this factor has been almost exhausted,” Kaznacheev is sure. “At the same time, there is a likelihood that the Russian theme will be used in political speculation in the US on the eve of the elections scheduled for November 2020, which could affect the depreciation of our currency.” Nikitochkin also does not exclude such a scenario. If in the first half of 2020, according to his assumptions, the ruble exchange rate will be quite stable (62-64 rubles / $ 1), then in the second half of the year and after the US presidential election, the “Russian card” can be played again

The Ministry of Economic Development in the base and target scenarios of economic development next year predicts that the average annual exchange rate of the ruble will hardly change compared to the expected indicator in 2019 (65.4 rubles / $ 1). In the first case, the dollar will cost 65.7 rubles, in the second – 65.1 rubles. At the same time, the cost of oil in both cases will drop to $ 57 per barrel. 

Stability over Course

According to Nikolaev, a strengthened ruble is not very good for the agricultural sector, although everything is relative. The cheaper the ruble, the greater the revenue from exporters, but do not forget that costs are also largely generated in the currency, since dependence on imported means of production remains. In the agricultural sector, due to the ruble strengthening, exporters lose their planned revenue, but at the same time, the availability of import of a number of types of raw materials necessary for the development of the industry increases, Zasov echoes it. For agricultural exporters, the strengthening of the ruble this year reduced competitiveness and growth opportunities, which was reflected, in particular, in a 2.6% reduction in the total export of the sector over the eight months of the year, agrees Snitko. “At the same time, a slowdown in external demand is a consequence of the growth of global protectionism, and the continued decline in world prices for most commodities only worsens export sales, she emphasizes. “Against this background, revenue in the agricultural sector is growing slightly.”

Nikitochkin also believes that given the significant export orientation of the Russian agro-industrial complex, the strengthening of the ruble negatively affects the industry: Russian products are more expensive and therefore less competitive on the world market. But at the same time, imported agricultural equipment, seeds, genetic material, plant protection products , etc. become cheaper . “However, the first factor, from my point of view, is stronger than the second, since there are often no alternatives to export, but there are import,” he explains. A strong ruble is becoming a factor in limiting the implementation of the state program for the growth of agricultural exports, adds Treasurers.

However, in general, for the economy, the absence of sharp movements in the foreign exchange market (both down and up) is favorable, since it reduces foreign exchange risks, Snitko said. Agricultural market participants have a similar opinion. “For any enterprise, stable macroeconomic conditions and the absence of drastic changes are optimal,” says co-founder and CEO of Damate Management CompanyRashid Khairov. – 2019 was a good year in this regard. In particular, the dynamics of the dollar during the year kept between 67.2 rubles. and 62.5 rubles, that is, the deviation was less than 10%. This is historically a very good indicator for our country. ” Despite the fact that the company’s arsenal has various instruments for hedging currency risks, it is extremely important for it that the exchange rate volatility has recently decreased significantly. This has a positive effect on the implementation of plans for the holding’s budget, a top manager emphasizes.

General Director of AFG National“Yuri Belov also believes that it is not so much the value of the ruble that matters as the stability of the exchange rate. “Agricultural producers do not feel discomfort when the ruble exchange rate during periods of sowing and harvesting campaigns is approximately identical,” he notes. The main thing for any business is stability and predictability of the ruble exchange rate, and this is now achieved, currency risks have decreased, the deputy general director of the Prodo group agrees»Henry Arutyunov. “In general, there is now a comfortable situation for doing business, however, since there is import in the structure of our purchases, perhaps we would be interested in lowering foreign exchange rates,” he adds. This year, the ruble exchange rate was within comfortable values, which made it possible to achieve most of the planned indicators, the general director of Rusmolco shares»Sumanta De. Although the exchange rate affected the value of imported goods, including feed components, equipment, and cattle, these costs were predictable, he said. 

No money, no demand

Daria Snitko calls the weak trend in food demand in the country the main trend affecting the agricultural sector. The reason is the lack of population income growth. “We do not see any reason for a reversal of demand in 2020,” she notes.

True, according to the results of the third quarter of Rosstatrecorded an increase in real disposable income of 3%. However, over the year they will add only 0.1%, but in 2020 – already 1.5%, the Ministry of Economic Development predicts. The acceleration of real disposable income growth from -0.1% in the second quarter to 3% in the third surprised most experts, Zasov admits. “It is still unclear what made it possible to achieve such a result, since this is due to the growth of other incomes — these are Rosstat’s unobservable incomes that are calculated using the balance sheet method. In the third quarter, they increased by 33%, ”he says. The increase in income, which is noted by operational statistics, shows the average income from all types of activities, including income from renting real estate, deposits, entrepreneurship, revaluation of the “gray” sector, and these data may differ from our feelings about the growth or decline in income,

The first half of 2019 was challenging, as a combination of tight fiscal policies and accelerated inflation pushed household consumption, Orlova said. But the slowdown in inflation in the second half of the year, she said, creates the conditions for the growth of real incomes of the population, and the prospects for 2020 look better in terms of income. According to Kaznacheyev, they will increase by 1-2%, which means a gradual increase in the capacity of the domestic market. “However, it should be remembered that next year the Central Bank plans to slow down the growth of retail lending from the current 20% to 10-15% year on year. This means that part of household income will have to go for accelerated repayment of loans, ”emphasizes Orlova. “For this reason, the prospects for accelerating demand in 2020 look extremely moderate.”Rosstat recounts indicators and now there are no statistics that could be fully trusted.

We will feel a really noticeable increase in consumption in two or three years, when large-scale investments in infrastructure through national projects will noticeably increase productivity and, consequently, people’s incomes, Snitko thinks. In order for the purchasing power of the population and demand to increase, people either have to earn more or spend less on obligatory payments, but we don’t have either. “In 2013, we had a period of economic growth without increasing real incomes, a consumer lending boom. What happened in 2014, I think everyone remembers, ”says Nikolaev.

True, Central Bank analysts believe that in the coming quarters budget spending and easing monetary conditions will contribute to a general increase in demand in the economy. At the same time, the slowdown in inflation will support the growth of real incomes of the population and consumer demand, follows from the October bulletin “What are the trends?” The Ministry of Economic Development predicts that by the end of the year, inflation will drop to 3.8% compared to 4.3% in 2018. In 2020, according to the basic scenario of the country’s social and economic development, inflation will be 3%, and the target assumes a level of 4%.

Inflation is low because people have no money, Nikolaev is sure. Nikitochkin also believes that the price increase was below the expectations of the Central Bank and the Ministry of Economic Development, because manufacturers did not see the opportunity to increase them because of the low purchasing power of the population. Zasov is also of the opinion that this year low inflation is generally negative and is the result of weak consumer demand. In the first quarter of 2020, this trend will continue, including due to an increase in the supply of agricultural products, which will put pressure on prices and thereby restrain them, he expects. According to VEB’s forecast, in the first half of 2020, inflation will continue to slow down to three percent or less. 

Consumer still saving

“Since the beginning of the year, retail trade has been showing a steady slowdown: in the third quarter, the growth rate decreased to 0.8% after 1.6% in the second,” Zasov compares. “Next year we expect some recovery, but overall the forecast for consumption dynamics is rather restrained.”

Consumer demand for food products as a whole continues to remain below the pre-crisis level, and no real prerequisites for changing the situation are yet to be expected, said Roman Titov, deputy head of the department of expert analysis of the Analytical Center under the Russian government. Despite the increase in revenue recorded by Rosstatin the third quarter, food retail sales continued to slow. Moreover, if in the first and second quarters it grew by 1.5-1.7% compared to last year, then according to the results of the third quarter it grew by only 0.7%, the expert compares.

The main changes in the purchasing power of the population this year occurred in relation to the most affordable types of fruits and vegetables, continues Titov. So, if in September 2018 it was possible to buy 1264 kg of cabbage for the average monthly income, then this year – 871 kg. The onion indicator for the year decreased from 1203 kg to 918 kg, for cereals – from 820 kg to 682 kg. “The opposite is true for potatoes, carrots and apples. In these segments, purchasing power over the year has grown most strongly: for apples – from 306 kg to 339 kg, carrots – from 791 kg to 848 kg, potatoes – from 1086 kg to 1156 kg, ”he lists.

” AFG National»Operates in the most stable markets in terms of demand. Groats and vegetables of “borsch set” are traditional components of the consumer basket, and the apple is one of the most affordable and popular fruits in Russia (in second place after bananas), therefore, according to Yuri Belov, the company does not expect any significant changes in consumer behavior. “According to our observations, the consumption of cereals in Russia over the past few years has not changed, unlike the structure of this market. Demand for STM products and nouns is decreasing, for brands it is growing, he comments. “Against the backdrop of the healthy lifestyle trend, there is a growing trend towards increasing popularity of legumes and exotic cereals such as quinoa, but their share in total consumption is still insignificant – about 5-6% and 2-3%, respectively.”

Non-growing demand can be seen both in the behavior of retailers (the closure of large-format stores, an increase in the share of discounters, the continued increase in promotions) and the behavior of consumers, who increasingly use online shopping to select the lowest prices, says Nikitochkin. “We see that the grocery retail market, net of inflation, is stagnating,” Khairov confirms. “The customer is gradually flowing into discounters, specialized stores are showing growth, and hypermarkets, by contrast, are losing their customers.” But this does not mean that the consumer has become less demanding and ready to buy cheap goods, the CEO of Damate emphasizes.“. On the contrary, active promotions of market leaders and premium brands make available products of a higher price segment. As a result, the consumer of STM, the economy, middle segment switches to more expensive brands, but at a special price.

According to Harutyunov, so far nothing portends the positive dynamics of solvent demand in the country and the volume of consumption of broiler meat and meat processing products. This year she was not there either. And here is Damate”Sees and predicts further stable growth of the turkey market. “Consumer research confirms the switch from pork and broiler to turkey. With a general negative dynamics in domestic consumption in the meat category, the turkey segment is growing, ”Khairov emphasizes. Next year, new drivers will continue to be growth drivers, including with an emphasis on situational consumption, he adds.

Solvent demand for raw milk this year has not changed much, and the low dynamics of demand for finished products is due to a number of factors, the main of which is the almost not growing disposable incomes of the population, Sumanta De says. Also, the consumer’s turn from dairy products to other product categories was a constraint. “If earlier milk was traditionally associated with a healthy lifestyle, now this bundle is almost destroyed, and consumers are increasingly replacing dairy products with something in their diet,” he complains. In addition, counterfeiting and the use of cheaper vegetable fats in dairy products without proper labeling remain an acute problem. This leads to a loss of confidence on the part of the consumer and, as a result, to a decrease in demand for dairy products in general, 

Money has become more affordable

The availability of debt financing has traditionally played an important role in the development of the agricultural sector. From this point of view, a decrease in the Central Bank’s key rate from 7.75% at the beginning of the year to 6.5% by mid-November creates a window of opportunity for the sector, which operates in fairly long cycles, says Orlova. According to her, this year borrowed funds became more affordable than in the second half of 2018, when rates went up, and banks, faced with an outflow of deposits, tried not to give out long loans. However, the prospects for a serious reduction in the cost of money in Russia look limited: in 2020, the government plans to finance indexation of salaries in the public sector by 5.4%, in addition, it is expected to finance national projects, which could lead to increased inflationary pressures, she warns.

The reduction in the key rate has a positive, but limited effect on the agro-industrial complex, since part of the loans the farmers attract at a reduced rate of up to 5%. “Some analysts agree that the rate can be reduced to 6% and this will be the optimal level that is consistent with global peers (it is believed that the effective rate = key rate minus inflation; it is desirable that this indicator be at the level of 2-3%) – says Nikitochkin. “But it’s worth remembering that the Central Bank is not very willing to reduce the rate, therefore, in the absence of significant shocks, I approximately evaluate both the possibility of adjusting the rate to 6% and its stabilization at the level of 6.5%.”

In the context of a further reduction in inflation, the Bank of Russia will soften its monetary policy, so that the key rate in the first half of 2020 may drop to 5.5%, Zasov does not exclude. He also considers this a positive factor for the agricultural sector, but agrees with Nikitochkin that in general, agricultural producers are little dependent on rate fluctuations. In January-August, about 700 billion rubles were allocated for agriculture. loans, including about 516 billion rubles, or 73% – on preferential terms at a rate that is often 1-2%. “A reduction in the key rate in this case has a greater effect on reducing the costs of the federal budget when recovering banks’ shortfalls in income,” the expert concludes.

The main effect of the reduction in the key rate will be received by the state due to the smaller amount of subsidies calculated at the key rate, agrees Treasurers. “Many experts expect from the regulator another rate cut at the December meeting. I don’t think that it will be the same as in October (by 0.5 percentage points), and I am more inclined to believe that the rate will remain at the current level until the end of 2019, ”he adds.

Thanks to the reduction in the key rate, financing has indeed become more affordable – although money is already cheap for the agricultural sector – but the question is whether it is needed at all if investment projects in the industry are still small, Nikolaev argues. “In addition, due to lower rates, carry trade may unfold, and if this happens, the ruble will weaken. However, the agricultural sector will benefit from this in any case, ”he said.

Lower rates are certainly a positive factor for the economy in general and for the industry in particular. However, in this process it is important to avoid inflationary risks, although the practice of the Central Bank shows that he learned to deal with them, says Arutyunov. According to him, financing is becoming more affordable, which is associated not only directly with the dynamics of the key rate, but also with the general stability of the economic situation in the country. “Group” Prod“Works with banks on a long-term basis, and therefore such changes for us cannot occur instantly. Nevertheless, we are constantly negotiating with banks, and how the situation develops, promises us good prospects in terms of reducing the costs of financing current activities and projects, ”he says. Reducing the key rate reduces the cost of capital and thus allows more efficient and more predictable management of costs and expenses, Sumanta De is in agreement with him.

Khairov draws attention to the fact that agricultural producers can raise money both at a preferential rate and at a commercial one, therefore the mechanism of action of the key rate is slightly different. So, with preferential lending, banks receive compensation, which directly depends on the size of the key rate, therefore, its decrease sometimes leads to the desire of creditors to compensate for lost income, including by changing the rate for the enterprise. By issuing money at a commercial rate, banks, following the Central Bank, are trying to reduce the cost of borrowed money. “Therefore, the influence of factors is a bit mixed. But we usually find compromises, ”he adds. 

How to grow further

Ivan Nikolaev from Aton does not see new growth points for the agricultural sector, except for export. Any products must be sold either domestically or abroad. Even if we talk about the development of deep processing, all the same, in the end, the goods should enter the market. Domestic demand depends on the consumer and his income, but they do not become higher. “Therefore, the only growth point in the current environment is supply abroad,” he emphasizes. In addition, you need to continue to address industry challenges. The efficiency of agriculture over the past 15 years has increased: average productivity has increased, modern equipment has appeared, Russia has become the largest exporter of wheat from an importer of grain. “These are serious achievements, but problems remain, so we need to continue to work,” Nikolaev is sure.

Sales may increase due to growth in physical volume or prices, and no positive changes have been planned so far with either, Daria Snitko from Gazprombank is in solidarity with him. “In my opinion, to increase the profit of agricultural enterprises, constant investments are needed in efficiency, modernization of capacities and processes,” she says. In the coming years, competition in the Russian food market will continue to intensify, while one should expect an increase in the number of mergers and acquisitions and, consequently, an increase in revenue of leading companies and concentration in the sector, adds Snitko.

Anton Kochetkov, senior manager of the Deloitte CIS CIS agro-industrial sector group of companies, also calls further consolidation of the industry in the hands of major players one of the possible points of growth for the agricultural sector. This may adversely affect its competitive development, but nevertheless will lead to increased productivity due to more efficient technologies and economies of scale. “In the long run, solving the problem of production efficiency will become one of the key tasks for the development and growth of the industry,” he thinks. “Productivity gains are a growth point in all industries, and the agricultural sector is no exception.” Also, one of the important goals of the development of the agricultural sector is the localization of the production of genetic material, he continues. Despite possible high initial investment,

In conditions when domestic demand is very limited and very sensitive to rising prices for final goods, it is advisable to optimize production processes and reduce costs, confirms Roman Titov from the Government Analytical Center. “The most striking example is dairy farming, where, with a conditionally stable population, milk production increases due to the involvement of a more productive herd, as well as an increase in the efficiency of dairy complexes, including through the introduction of digital technologies,” he commented. Maxim Nikitochkin from EY considers the dairy industry an obvious point of growth for the agricultural sector, since there is still a huge reserve for import substitution. According to the results of the year, the import of dairy products may reach about $ 3 billion, he estimates.

According to Oleg Zasov from VEB, the main development trend in agriculture in the near future is to increase efficiency by reducing costs, in particular, technological modernization, the use of advanced technologies. The expansion of existing markets will continue, including through increased production of oilseeds, vegetables and fruits. “In certain segments, production will gradually move from small-scale to the sector of agricultural organizations,” he said. – The growth points are represented by such segments as deep processing of agricultural products, the market for organic products, and possibly the production of bioplastics. Also, in connection with a change in the consumption model, new functional products will appear. ”

Nikitochkin also thinks that in the long term it is important to develop technologies that meet modern world challenges, in particular FoodTech – products based on vegetable protein (including the rapidly growing industry of vegetable meat and drinks, alternative to milk), development in the field of production of new generation sugar substitutes, modern smart packaging, biotechnology. “The future is with functional, personalized, plant-based food. In the more distant future, this is food that lengthens life, directly affects the brain, taking into account the genome of each consumer, ”the expert predicts. Also, Nikitochkin calls the digitalization of production a growth point for the agro-industrial complex, which allows to increase productivity and reduce costs.

Precision farming technologies in crop production as a whole remain relevant, Titov confirms, but draws attention to the fact that they may be less in demand due to both the high cost of their implementation and other factors associated with the lack of the necessary infrastructure. “In addition, unlike European countries, where the land fund is very limited, our country has much more land, which generally reduces incentives to intensify production,” he adds.

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