Russia's Agriculture Ministry to pay grain, vegetable farmers up to 900 rubles/hectare of land they work to ease their membership in WTO and help them pay off their loans

Nevin Barich

NEW YORK , September 20, 2012 (Bloomberg LP) – Russia’s Agriculture Ministry will support farmers with payments for every hectare (2.47 acres) of land they work to ease their membership in the World Trade Organization and help them pay off loans, according to the country’s Grain Union.

The ministry identified “increasing financial stability of agriculture producers” and “food independence” as priorities in its agriculture development program for 2013, and through 2020, and will start per-hectare payments to farms from next year, said Arkady Zlochevsky, the union’s president.

The government will pay 207 to 900 rubles ($6.59 to $28.64) per hectare to grain and vegetable farmers, depending on output volumes and climate conditions, he told reporters today in Moscow.

Russia became the 156th member of the World Trade Organization last month after completing almost two decades of negotiations, marking the biggest step in global trade liberalization since China joined a decade ago. The Russian plan complies with WTO rules on farm support, Zlochevsky said. The payments will partly replace subsidized interest rates for farmers, the main support mechanism in the previous agriculture program from 2008 through 2012, he said.

Russia may provide 15 billion rubles in per-hectare payments next year, rising to 38 billion rubles in 2020, Zlochevsky said, citing the ministry’s sector support program for 2013-2020.
The support may help pay off debts in the agricultural sector, Zlochevsky said. Agricultural companies have 1.7 trillion rubles of debt, compared with the sector’s annual revenue of 1.4 trillion rubles, he said. The debt includes 400 billion rubles of bad loans, or those that are seen as hardly payable, he said.

PORK, POULTRY OUTPUT

The previous five-year support program produced mixed results in addition to the debt burden, according to the union. Pork and poultry production rose as planned, while targets on milk output and technological efficiency weren’t achieved, Zlochevsky said.

As a result of new support measures, Russia is targeting an increase in cereals output to 115 million metric tons and grain exports to 30 million tons by 2020, Zlochevsky said, citing the ministry’s program. Last marketing year, the grain crop was 94.2 million tons and exports were a record 27.2 million tons, according to ministry data.

Russia may lose 188 billion rubles next year and 257 billion rubles in 2014 as a result of lower import duties stemming from WTO membership, Economy Minister Andrei Belousov told lawmakers before the July 10 vote to ratify the accession. The figure may reach 300 billion rubles by 2015 as the average duty level drops to 6 percent from about 9.5 percent, he said.

Among concessions Russia won in its WTO talks was the right to channel as much as $9 billion a year into agricultural subsidies during a transition period, up from more than $5 billion at present, according to Belousov.

--With assistance from Marina Sysoyeva in Moscow. Editors: John Deane, Claudia Carpenter

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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