The expectations of Russian farmers for 2019 have worsened. According to analysts, only 30% of companies see the prospects for a positive development of the agro-industrial complex in the coming year - this is the minimum figure for the last four years.
Less than a third of companies assess the prospects for the development of agribusiness in Russia in the coming year optimistic. This was the conclusion of the analysts of the consulting company Deloitte in the study “Agricultural Market Overview”, prepared in December 2018 (RBC has it at its disposal, the survey was conducted in the fourth quarter).
Since 2015, Deloitte has been conducting such a study based on a survey of companies operating in the agricultural sector. According to the results of respondents' answers, analysts determine the index indicators, which ranges from -1 to 1, where one is the most positive assessment result. What is the reason for the decline in optimism among Russian farmers and what is the current situation in the agricultural sector, RBC understood.
Too few optimists
The number of companies optimistic about the prospects for the development of the agro-industrial complex in the coming year has decreased. According to Deloitte, over the year, the index for assessing the prospects for the development of the agricultural sector decreased by 7 points, to 0,10 from 0,17.
“For the first time in the history of observations, the number of companies evaluating the prospects for the development of agribusiness in Russia next year is optimistic, has dropped to 30%,” explained Dmitry Kasatkin, head of research projects at the Deloitte industry sector, to RBC. In previous years, those with positive expectations had more: in 2017 (expectations for 2018) - 45% of all companies, and in 2016 (for 2017) - 40%. Most of the respondents do not expect any changes: their share increased by 16 percentage points compared to the previous year, up to 57%.
The main challenges for the industry in the Deloitte survey in 2018 are the high cost of energy resources, the lack of state support and funding, as well as the lack of qualified personnel.
Why are farmers depressed
Analysts at Deloitte explain the pessimistic expectations for 2019 as “high base”: in 2018, a record number of companies were assessed positively (i.e. above average) in the Russian agricultural sector, says Kasatkin. At the end of this year, their number will increase by 7 percentage points. and make up 85% of all respondents. For comparison: in 2015, only 61% of respondents positively assessed the state of the Russian agricultural sector. According to Deloitte estimates, the main sub-sector for profit growth for 2018 will be pig breeding, where profitability will increase by 2017% compared to 79. Growth in profitability is also expected in crop production. In poultry farming, profits will remain at the current level, a decrease is expected from milk producers.
The decline in optimism among Russian farmers "seems to be true," said Daria Snitko, an analyst with Gazprombank. In her opinion, two factors influence the expectations of market participants. Firstly, the industry still does not have clarity about what the new program of state support for the agricultural sector will look like, which is a key condition for stimulating the industry and developing investments. In particular, market participants do not understand what will happen with subsidies under the state program for capital expenditures for the construction of greenhouse complexes. The second factor is pessimistic market expectations regarding consumer demand.
The pessimistic expectations of agricultural companies are associated more with the macroeconomic situation, and not with the situation in the industry, said Vitaly Sheremet, head of the KPMG agribusiness center in Russia. “The economy as a whole lacks positives and money, and this puts pressure on farmers,” he notes. In recent years, the profile of the agrarian has expanded, Sheremet points out: now they include not only those who work directly on the ground, but also “the whole chain of food producers from the field to the counter”. Manufacturers of finished products have a favorable situation: in particular, confectioners are ready to double production by 2024, he points out. For traditional agrarians, plant growers, this year was economically even better than the past, Sheremet notes. In 2018, the grain harvest amounted to 110 million tons, which is less than last year's record result of 135,4 million tons. As a result, grain prices rose: according to the analytical resource "ProZerno", as of December 14, wheat of the third class cost 60% more than in December 2017 (13,2 thousand against 8,3 thousand rubles per ton). The situation with state support, when the state does not fulfill previously taken obligations, could also negatively affect the expectations of agricultural producers, Sheremet agrees.
What is wrong with state support of agrarians
Government support is one of the three main factors in the competitiveness of Russian agriculture in global markets, according to the Deloitte survey. In 2018, farmers were more satisfied with receiving subsidies than a year ago. According to Deloitte, in 2018 this indicator grew by 48% and reached 0,24 (also with a maximum rating of 1).
For the upcoming 2019, the Ministry of Agriculture announced the amount of state support necessary for agrarians at the level of 302 billion rubles. Now in Russia there is a program for the development of the agricultural sector until 2020. The need for a “revision of the approach to the state program for the development of agriculture" was announced in June by Deputy Prime Minister Aleksey Gordeev in charge of agriculture. In the new state program, in particular, it is planned to change approaches to the provision of a single subsidy and a subsidy to compensate for a part of direct costs, announced Elena Fastova, deputy head of the Ministry of Agriculture. Changes should be primarily aimed at increasing the export of agricultural products. In the framework of the May decree of President Vladimir Putin by 2024, Russia should increase its exports of agricultural products to $ 45 billion.
Expansion of agricultural products export in 2018–2024, according to Deloitte estimates, will give a total additional GDP growth of 7,1 trillion rubles. The total additional tax revenue received from the increase in the production and export of agricultural products will exceed 1 trillion rubles. The average annual GDP growth as a result of increased exports will amount to 2024% until 0,3.
What will happen to world agriculture
In the next decade, world agriculture, according to the data of the Organization for Economic Cooperation and Development (OECD) presented in the study, will grow more slowly. The average annual growth rate will be 1,5%. Agricultural expansion will be concentrated in developing countries, and the fastest growth is expected in sub-Saharan Africa and Southeast Asia. It is in Southeast Asia (including China, India, Japan and Korea) that almost 40% of the global cereal volume (including almost 90% of rice), about 40% of meat, more than half the volume of vegetable oil and almost 70% of fish are produced .
In the region of Eastern Europe and Central Asia, which includes Russia, the production of agricultural products and fish will grow by 14%. The region will strengthen its position as the second largest producer of wheat and by 2027 will bring its share in world production to almost 22%. Corn production will increase by 17%, sunflower and rapeseed - by 25%.
Global demand for agricultural products over the next ten years will also grow more slowly, Deloitte analysts predict. This is largely due to the fact that the level of consumption in many countries has almost reached the level of saturation. More than half of agricultural consumption is made up of five main products: rice, corn, wheat, milk and dairy products, as well as soybeans. Demand for corn, more than half of which falls on the production of animal feed and biofuels, will grow by an average of 2% per year. World consumption of fresh and processed dairy products will grow in the next ten years annually by 2,2 and 1,7%, respectively.
Author: Elena Sukhorukova.
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