Russia - Agriculture

Agricultural Policy

Agricultural reform has proved to be a tough challenge for Russia during its transition to a market economy. The challenge comes from the legacy of the Soviet period and from deeply imbedded cultural biases against individualism. Because of agriculture's vital economic role, large-scale agricultural reform is necessary for success in other sectors. In the mid-1990s, however, private initiative was not rewarded, and inefficient input distribution and marketing structures failed to take advantage of agricultural assets.

This restructuring program has progressed slowly. Although 95 percent of the state and collective farms underwent some form of reorganization, about one-third of them retained essentially their earlier structure. Most of the others, fearing the unstable conditions of market supply and demand that faced individual entrepreneurs, chose a form of collective ownership, either as joint-stock companies or as cooperatives. The conservatism of Russia's farmers prompted them to preserve as much as possible of the inefficient but secure Soviet-era controlled relationships of supply and output.

A number of factors have contributed to the slow progress of agricultural reform. Until the mid-1990s, the state government continued to act as the chief marketing agent for the food sector by establishing fixed orders for goods, thus guaranteeing farmers a market. The government also subsidized farms through guaranteed prices, which reduced the incentive of farmers to become efficient producers.

Perhaps most important, effective land reform has not been accomplished in Russia. The original land reform law and subsequent decrees did not provide a clear definition of private property, and they did not prescribe landholders' rights and protections. The nebulous status of private landholders under the new legislation made farmers reluctant to take the risk of proprietorship. In March 1996, President Yeltsin issued a decree that allows farmers to buy and sell land. However, in April 1996 the State Duma, heavily influenced by the antireform KPRF and its ally, the Agrarian Party of Russia (representing the still formidable vested interests of collective and state farms), passed a draft law that prohibits land sales by anyone but the state. Recent opposition to the new notion of private landownership is based in a strong traditional Russian view that land must be held as collective rather than individual property.

In their early stages, the two types of organization also functioned differently in the distribution of agricultural goods. State farms delivered their entire output to state procurement agencies in response to state production quotas. Collective farms also received quotas, but they were free to sell excess output in collective-farm markets where prices were determined by supply and demand. The distinction between the two types of farms gradually narrowed, and the government converted many collective farms to state farms, where the state had more control.

As of 1996, individual private farming had not assumed the significance in Russian agriculture that reformers and Western supporters had envisioned. Although the number of private farms increased considerably following the reforms of 1990, by the early 1990s the growth of farms had stalled, and by the mid-1990s the number of private farms actually may have dropped as some individuals opted to return to a form of cooperative enterprise or left farming entirely. By the end of 1995, Russia's 280,000 private farms accounted for only 5 percent of the arable land in Russia.

The main thrust of Yeltsin's agricultural reform has been toward reorganizing state and collective farms into more efficient, market-oriented units. A decree of December 1991 and its subsequent amendments provided several options to state and collective farmers for the future structure of their farms. The decree required that farmers choose either to reorganize into joint-stock companies, cooperatives, or individual private farms, or to maintain their existing structure. Under the first two arrangements, workers would hold shares in the farms and be responsible for managing the enterprises. An individual farmer could later decide to break from the larger unit and establish private ownership of his or her share of the land, as determined by an established procedure.

A number of factors made the Soviet collectivized system inefficient throughout its history. Because farmers were paid the same wages regardless of productivity, there was no incentive to work harder and more efficiently. Administrators who were unaware of the needs and capabilities of the individual farms decided input allocation and output levels, and the high degree of subsidization eliminated incentives to adopt more efficient production methods.

Crops

Grains are among Russia's most important crops, occupying more than 50 percent of cropland. Wheat is dominant in most grain-producing areas. Winter wheat is cultivated in the North Caucasus and spring wheat in the Don Basin, in the middle Volga region, and in southwestern Siberia. Although Khrushchev expanded the cultivation of corn for livestock feed, that crop is only suitable for growth in the North Caucasus, and production levels have remained low compared with other grains. Barley, second to wheat in gross yield, is grown mainly for animal feed and beer production in colder regions as far north as 65� north latitude (the latitude of Arkhangel'sk) and well into the highlands of southern Siberia. Production of oats, which once ranked third among Russia's grains, has declined as machines have replaced horses in farming operations.

Yeltsin's Agricultural Policies

The Yeltsin regime has attempted to address some of the fundamental reform issues of Russian agriculture. But agricultural reform has moved very slowly, causing output to decline steadily through the mid-1990s. Reform began in Russia shortly before the final collapse of the Soviet Union. In December 1990, the Congress of People's Deputies of the Russian Republic enacted a number of laws that were designed to restructure the agricultural sector and make it more commercially viable. The Law on Peasant Farms legalized private farms and allowed them to operate alongside state and collective farms, to hire labor, and to sell produce without state supervision. The same session of the congress passed the Law on Land Reform, which permitted land to be bequeathed as an inheritance from one generation to the next, but not to be bought or sold. The government also established the State Committee for Agrarian Reform, whose responsibility was to oversee the transfer of available land to private farming.

During Stalin's regime, the government assigned virtually all farmland to one of two basic agricultural production organizations--state farms and collective farms. The state farm was conceived in 1918 as the ideal model for socialist agriculture. It was to be a large, modern enterprise directed and financed by the government. The work force of the state farm received wages and social benefits comparable to those enjoyed by industrial workers. By contrast, the collective farm was a self-financed producer cooperative that farmed parcels of land that the state granted to it rent-free and that paid its members according to their contribution of work.

Private plots also played a role in the Soviet agricultural system. The government allotted small plots to individual farming households to produce food for their own use and for sale as an income supplement. Throughout the Soviet period, the productivity rates of private plots far exceeded their size. With only 3 percent of total sown area in the 1980s, they produced over a quarter of agricultural output.

Increased production of fodder crops and expansion of pastureland have supported Russia's livestock industry, although economic conditions have caused cutbacks in animal holdings. Cattle are the most common form of livestock except in the drier areas, where sheep and goats dominate. The third-largest category is pigs, which are raised in areas of European Russia and the Pacific coast that offer grain, potatoes, or sugar beets as fodder. Only very small numbers of chickens are kept, and frozen chicken has become one of Russia's largest import items.

The Gorbachev Reforms

The Gorbachev agricultural reform program aimed to improve production incentives. Gorbachev sought to increase agricultural labor productivity by forming contract brigades consisting of ten to thirty farmworkers who managed a piece of land leased from a state or collective farm. The brigades were responsible for the yield of the land, which in turn determined their remuneration. After 1987 the government legalized family contract brigades and long-term leasing of land, removing the restrictions on the size of private agricultural plots and cutting into the state's holdings of arable land.

Agriculture

Climatic and geographic factors limit Russia's agricultural activity to about 10 percent of the country's total land area. Of that amount, about 60 percent is used for crops, the remainder for pasture and meadow (see table 15, Appendix). In the European part of Russia, the most productive land is in the Central Chernozem Economic Region and the Volga Economic Region, which occupy the grasslands between Ukraine and Kazakstan. More than 65 percent of the land in those regions is devoted to agriculture. In Siberia and the Far East, the most productive areas are the southernmost regions. Fodder crops dominate in the colder regions, and intensity of cultivation generally is higher in European Russia. The last expansion of cultivated land occurred in the late 1950s and early 1960s, when the Virgin Lands program of Nikita Khrushchev opened land in southwestern Siberia (and neighboring Kazakstan) for cultivation. In the mid-1990s, about 15 percent of the working population was occupied in agriculture, with the proportion dropping slowly as the younger population left rural areas to seek economic opportunities elsewhere (see Rural Life, ch. 5).

Legumes became a common crop in state farms in the 1980s. Potatoes, a vital crop for food and for the production of vodka, are grown in colder regions between 50� and 60� north latitude. Sugar beet production has expanded in recent years; the beets are grown mainly in the rich black-earth districts of European Russia. Flax, also a plant tolerant of cold and poor soils, is Russia's most important raw material for textiles, and the country produced about half the world's flax crop in the 1980s. Flax also yields linseed oil, which together with sunflowers (in the North Caucasus) and soybeans (in the Far East) is an important source of vegetable oil. Production of fruits and vegetables increased as private farms began to expand around 1990. In the mid-1990s, the largest yields in that category were in cabbages, apples, tomatoes, and carrots.

Soviet Policy

Under Stalin the government socialized agriculture and created a massive bureaucracy to administer policy. Stalin's campaign of forced collectivization, which began in 1929, confiscated the land, machinery, livestock, and grain stores of the peasantry. By 1937 the government had organized approximately 99 percent of the Soviet countryside into state-run collective farms. Under this grossly inefficient system, agricultural yields declined rather than increased. The situation persisted into the 1980s, when Soviet farmers averaged about 10 percent of the output of their counterparts in the United States.

More about the Economy of Russia.

However, in 1996 several factors were exerting pressure on the agricultural sector to become commercially viable. The federal government has retreated from its role as a guaranteed purchaser and marketer, although some regional governments are stepping in to fill the role. And private markets are emerging slowly. Increasingly, Russian agricultural production must compete with imported goods as the gap between domestic prices and world prices narrows. In addition, the fiscal position of the federal government has forced it to reduce subsidies to many sectors of the economy, including agriculture. Subsidies are among the targets of major budget cuts to comply with the standards of the IMF and other Western lenders and achieve macroeconomic stabilization.

The most dramatic declines occurred in livestock production. Farmers reduced their holdings of animals as the price of grains and other inputs increased. As meat prices rose, the composition of the average consumer's diet included less meat and more starches and vegetables. Reduced demand in turn exacerbated the decline in livestock production.

Although Gorbachev's reforms increased output in the agricultural sector in 1986, they failed to address fundamental problems of the system, such as the government's continued control over the prices of agricultural commodities, the distribution of agricultural inputs, and production and investment decisions. In the contract brigade system, farmers still had no real vested interest in the farms on which they worked, and production suffered accordingly. In the 1980s, the Soviet Union went from being self-sufficient in food production to becoming a net food importer.

Agricultural Production

Like the rest of the economy, the Russian agricultural sector has experienced a long, severe recession in the 1990s. Even before the dissolution of the Soviet Union, the output of grains and other crops began to decline, and it decreased steadily through 1996 because of the unavailability of fertilizers and other inputs, bad weather, and major readjustments during the period of transition. In 1995 overall agricultural production declined 8 percent, including a drop of 5 percent in crop production and 11 percent in livestock production. That year Russia suffered its worst grain harvest since 1963, with a yield of 63.5 million tons.

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