New drivers of growth in the Russian agricultural export market
According to Webangah News quoted by Mehr’s reporter, Hossein Shirzad, an analyst of agricultural development issues, wrote in a special note for Mehr; The goals set by the President of the Russian Federation to increase the export of agricultural products by 2030 can be achieved by improving the attractiveness of investment in agricultural and industrial complexes and increasing the share of high-value export products; But how can Russia increase the export of agricultural products to 70 billion dollars?
The agricultural industry of Russia approached 2024 with achievements that are proof of the obvious successes in the development of this industry. Import substitution has been the main driver of growth in the national agricultural and industrial complex for a long time. As a result, in the first half of the 2020s, food security targets were met for almost all major commodity groups. In 2021-2020, for the first time in modern history, Russia achieved a positive trade balance for agricultural and industrial products, and in 2023, Russian agricultural and industrial exports reached a record level of $43.5 billion. But in 2024, the president has set a new strategic goal for Russia’s agricultural and industrial complexes; Increase in exports by 1.5 times compared to the level of 2021, which is equivalent to 55 billion dollars per year.
Maintaining the current export product structure and the general principles of industry regulation would jeopardize the achievement of this tough goal. At the same time, the continuous focus of the industry and the regulator on improving the structure of the export product portfolio, achieving optimal structural costs of production and a rational approach to ensuring technological security will increase the export potential of agricultural and industrial complexes to 65-70 billion dollars per year. Further growth of Russia’s agro-industrial complex is possible mainly by increasing supply to world markets, where Russian agricultural producers face intense price competition. So far, domestic production costs for grains have allowed for successful competition, but Russia is lagging behind major global suppliers in the production and supply chain of animal proteins.
The basic approaches of managing the development of agricultural and industrial complexes must undergo the following changes to realize this:
First, economies of scale can be achieved by creating national champions or strengthening a national food bourgeoisie with sufficient market power in global markets. Of course, their structure can be different. Large agricultural businesses (similar to JBS in Brazil), the training of international trading institutions ADM, Bunge, Cargill, Louis Dreyfus Company or cooperatives Copersucar, Coamo, ACA are among them.
Second, ensuring the fact that national agricultural producers have access to the best technologies to optimize structural costs; Efficient genetics (including transgenic crops for feed), advanced inputs (crop protection products, agricultural technologies and equipment).
Third, creating a sufficient logistics infrastructure for export and avoiding its monopoly.
Fourth, ensuring the attractiveness of investment and profitability of the agricultural industry in conditions of excess structural capacity.
High exports, low income
Today Russia is one of the leading suppliers of agricultural and industrial products to world markets. In 2023, this country ranked 6th in terms of supply volume, but 8th in monetary terms with a global market share of more than 2%. This is due to the fact that Russia has the record of “lowest prices per ton of exports” among the world’s grain leaders, at about $600 per ton of exported products. This is because the export structure of global value leaders is dominated by high-value commodities or downstream products. For example, China with a record ($2,100) and Europe ($1,400) with 40-50% of the export of highly processed and refined products and B2C products are the leaders in terms of price per ton of exports.
Europe has a strong agricultural sector, but its main export income comes from other sectors.
China has developed a strong food industry that processes domestic and imported raw materials for domestic consumption and intra-regional supply to Southeast Asian countries. For other global suppliers, highly refined and B2C products account for an average of 15-20% of exports. The higher price per ton is due to higher value goods such as animal proteins, oils or basic feeds, mainly soybean derivatives.
Export development and target markets
Russia’s export potential depends on two factors: long-term access to global markets for Russian companies and progress in achieving food security goals in different countries and regions.
The key areas for the development of Russian exports will be the markets of China, MENA, the sea, India and to some extent sub-Saharan Africa. For various reasons, it is unlikely that other macro-regions will become the main drivers of Russian export growth.
The CIS market is close to saturation with Russian agricultural products, which account for about 70-80% of imports. Further growth in supply is possible as a result of population growth and specific consumption, as well as elimination of competition in some products, but the CIS market is not large enough to guarantee long-term growth of Russian agricultural and industrial complexes.
Latin America is also the largest supplier of agricultural products to the world market, so exports from Russia are limited to certain products.
On the other hand, the medium-term growth of exports to developed markets in North America, Europe, developed Asia, Australia and Oceania due to political factors, intra-regional trade to Well developed and affordable imports from Latin America are limited.
China and Russia market
China is the largest buyer of food in the world and imports more than 186 billion dollars of agricultural products annually. Russia accounts for only 3% of China’s imports, which is because Russia exports very little of the agricultural products China needs.
Various basic goods account for the largest share of China’s imports, which is about 31% or 57 billion dollars; These items include soybeans from Brazil, the United States and Argentina totaling $45 billion annually, corn (the United States and Ukraine are the main suppliers) about $5.5 billion, fish and bone meal (mainly from Peru) 2.4 billion dollars, and oats and flour are about 2.1 and 1.2 billion dollars, respectively.
Animal proteins and dairy products are in second place. In the import structure, there are about 15 billion dollars of beef (60% of Latin America), 9 billion dollars of fish and seafood (mainly from Russia and Vietnam), 4 billion dollars of poultry from Brazil and North America, and 7 billion dollars of dairy products, of which 50% New Zealand milk powder.
B2C imports are more than 11% or 20 billion dollars, of which 5 billion dollars are baby food and complementary foods and 2 billion dollars are sweets and chocolates.
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Imports of vegetable oils amount to 11 billion dollars, 40% of which is palm oil, while other oils are imported from Russia, Ukraine, Canada, Brazil and Argentina. It will be.
While China’s strategy aims to achieve self-sufficiency in staple grains, imports of staple foods are expected to increase over the next decade. In fact, Russia’s 3% share in China’s imports is due to the limited portfolio of export agricultural products.
Mena and Russia market
The MENA market (North Africa and the Middle East) has a capacity of about 125 billion dollars and a potential capacity of 130 to 150 billion dollars. Russia’s share in this market does not exceed 13%.
Food staples account for the largest share of MENA imports. This number is about 23% or 29 billion dollars, of which 14 billion dollars is wheat (buying from Russia for a total of 8 billion dollars), 5 billion dollars of sugar and molasses, and another 5 billion dollars of rice, 80% of which is imported from India.
The import of basic feed is about 22 billion dollars, of which about 12% is related to imports from Russia. In the import of basic food, corn accounted for 8 billion dollars, soybeans from Brazil and the United States accounted for about 7 billion dollars, oats for 3 billion dollars, and soybean meal (mainly from Argentina) for 2.5 billion dollars.
Also, about 16 percent, or 19 billion dollars, of Russian imports are devoted to animal protein and dairy products. Imports are beef ($5 billion), dairy products ($4 billion), chicken ($4 billion), more than two-thirds of which are imported from Brazil. Fish (about 2 billion dollars) should also be added to this basket, although Russia is not well represented in this sector.
In addition, the region imports $16 billion of oil and oilseeds, of which about $8 billion is palm oil (mainly from Indonesia and Malaysia), $2 billion USD of soybean oil (from Argentina and Spain) and about 2 billion dollars of sunflower oil (from Russia and Ukraine).
The region is basically dependent on food imports because the climate conditions make it impossible to balance production and consumption and the growing population in the long term.
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Southeast Asian market (SEA) and Russia
SEA annually imports $100 billion worth of food from other mega-regions, $22 billion of which comes from China. Russia is practically absent in the region, its share in regional imports is less than one percent.
The import structure of the region is dominated by basic goods, which make up about 20%. Maritime countries are major consumers of soybean meal ($7 billion mainly from Argentina and Brazil), soybeans ($5 billion from Brazil, USA and Canada) and corn ($4 billion from Argentina and Brazil).
The region is also a major importer of dairy products (mainly milk powder from New Zealand, worth $6 billion per year), fish and seafood ($5 billion, mainly from China), beef (4 billion dollars from India, Australia, Brazil and the United States of America) and chicken meat (2 billion dollars from Latin America and the United States of America). is
Main food imports accounted for about 17 billion dollars, more than half of which was wheat (mainly from Australia), about 3 billion dollars of sugar and molasses and 2 billion dollars of rice (mainly from India).
Also, China accounts for 40-60% of B2C fruit, vegetable and product imports and 25% of highly refined product imports.
Sub-Saharan Africa and Russia market
It is a region with relatively low imports ($43 billion) where Russia’s share is 2%. The main obstacle to increasing imports is low purchasing power.
Major foodstuffs account for 36% of the region’s imports (about $15 billion): rice imports – more than $6 billion mainly from the sea, wheat imports – About 5 billion dollars come from Russia, the United States of America, France and Canada.
This region imports about 2 billion dollars worth of chicken, whose main suppliers are the United States of America, Brazil and Poland.
Sub-Saharan African palm oil imports total about $5 billion, while imports of other oils are negligible.
This region is known for slow import growth and limited purchasing power. Despite rapid population growth, the region supports food imports mainly through revenues from mineral exports, which have limited potential. However, some countries (Nigeria, Angola, Congo and Gabon) can be favored for certain product groups.
Therefore, the priority geographical areas for Russian exports are those countries of the southern world that are major net importers of food and due to their developed economy or resources Their interest has an effective demand.
So the markets are mainly China, MENA, Southeast Asia and India. The total interregional import of the selected target areas is approximately 500 billion dollars, of which Russia accounts for about 7%.
