NATALIA SHAGAIDA EXPLAINS WHY RUSSIANS ARE GETTING INCREASINGLY INTERESTED IN AGRICULTURE
Natalia Shagaida, Head of the Gaidar Institute’s Agrarian Department, spoke to Forbes on whether it would make sense to invest in projects related to agriculture.
Last week, the internet services “Yula” and “Announcements VKontakte” released data on a growing demand for ready-made companies. The users displayed the highest interest in agricultural enterprises: in April 2022, the number of views and search queries for these ads increased by 3.6 times relative to February. The interest in investing in farms first became visible in March, after the launch of Russia’s “special operation” in Ukraine.
Natalia Shagaida believes that presently, investment in small and medium-sized agricultural businesses has some serious drawbacks. The interest in small and medium-sized businesses may be fueled by considerations like “the price of food is rising, and there is no end in sight to this rise, especially in view of the escalation of events in Ukraine”. However, there are questions as to what to buy. “Indeed, Russia is a major exporter of grain and sunflower oil. Last year, these were extremely profitable businesses, and who will sell them in such a situation? Milk production is a very difficult, long and expensive process, and in Russia, it is still impossible to produce milk cheaper than in the countries that are its main exporters to foreign markets. The market for domestic meat is already saturated, and exports are relatively small, while competition is high, so the buyer must be ready to increase production efficiency, and this is not something that can be achieved by everyone. Potatoes, vegetables, fruits are labor-intensive and capital-intensive products, in Russia they are mainly produced by households, and the attempts to “transplant” them into more modern production facilities, that is, farms, can hardly be called successful.”
Natalia Shagaida believes that presently, investment in small and medium-sized agricultural businesses has some serious drawbacks. The interest in small and medium-sized businesses may be fueled by considerations like “the price of food is rising, and there is no end in sight to this rise, especially in view of the escalation of events in Ukraine”. However, there are questions as to what to buy. “Indeed, Russia is a major exporter of grain and sunflower oil. Last year, these were extremely profitable businesses, and who will sell them in such a situation? Milk production is a very difficult, long and expensive process, and in Russia, it is still impossible to produce milk cheaper than in the countries that are its main exporters to foreign markets. The market for domestic meat is already saturated, and exports are relatively small, while competition is high, so the buyer must be ready to increase production efficiency, and this is not something that can be achieved by everyone. Potatoes, vegetables, fruits are labor-intensive and capital-intensive products, in Russia they are mainly produced by households, and the attempts to “transplant” them into more modern production facilities, that is, farms, can hardly be called successful.”