Agriculture of the Vologda oblast on the eve of Russia's accession to the world trade organization

The federal authorities consider Russia’s joining WTO as the step of paramount importance, which will give an impetus to the modernization of the national economy. At the same time, it is acknowledged, that Russia’s accession to WTO will lead to serious complications in the functioning of certain real sector branches. First of all, it concerns agriculture and the provision of the country’s food security. As a matter of fact, the national economy considerably lags behind the developed countries in the issues of productivity and competitiveness.

Despite the fact that WTO norms and regulations will be introduced gradually, the fundamentally new economic and organizational-legal environment is being created for Russian agribusiness.

Acute issues of the Oblast’s agricultural development

Agricultural branch of the Vologda Oblast at the beginning of 2011 was represented by 480 agricultural organizations (including part-time farms of enterprises, organizations, educational institutions), 2363 peasant (farmer) enterprises, including individual entrepreneurs, and 258.9 thousand individual farms (private subsidiary plots of the population). 29% of the Oblast population live in rural areas. 7% of those employed in the region’s economy work in the agricultural sector [1, 8].

Possessing 0.6% of the Russian Federation’s agricultural land, the Oblast produces 0.7% of the country’s gross agricultural output. According to the agricultural enterprises’ production volume per capita in 2011, the Oblast ranks 3rd in milk production, 8th – in egg production, 24th – in meat production.

However, it should be emphasized, that the branch is functioning under difficult economic conditions determined by the lack of financial resources of agricultural goods producers, obsolete agricultural material and technical base, unfavorable price ratio between agricultural and industrial products, as well as other adverse factors, many of which have been formed in the process of transition to a market economy [5]. As a result, the Oblast’s agricultural potential is used not to the fullest extent.

Low efficiency of agricultural land usage is the major problem. For 20 years of market reforms 106 thousand hectares of cropland have been excluded from agricultural usage, and the share of ploughland used for cultivation of crops has decreased from 95.7% to 60% (tab. 1) .

The process of soil fertility reduction is taking place. One of the factors, hampering the development of crop growing, is the unsatisfactory physiochemical state of soils (overacidity and hyperhydration, negative balance of nutrients and humus, etc.), which can be improved by implementing a set of special measures, but the actions, undertaken in this direction, are extremely limited (tab. 2) .

During the years of reforms, the input of organic fertilizers decreased 8.3-fold, mineral fertilizers – 7.5-fold, and calculated per 1 hectare of crops – 4-fold and 3.5-fold respectively; liming of acidic soils has been practically abandoned (areas of liming have decreased 125-fold). Due to the lack of funding, the melioration systems, created earlier, are now deteriorating.

Table 1. Dynamics of agricultural land area in all types of farms, at the end of the year, thousand hectares

Indicators	1990	1995	2000	2005	2010	2011	2011 in % to 1990
Agricultural land, total, thousand hectares	1369	1335	1189	1141	1096	1089	79.5
Including cropland	851	847	792	764	748	745	87.5
Including ploughland under crop	815	757	686	542	478	446	54.7
Share of ploughland under crop, %	95.7	89.4	86.6	70.9	63.9	60	-35.7 p.p.
Natural hayfields and pastures	468	469	357	326	295	291	62.2
Other	50	19	40	51	53	52	104.0

Table 2. The volume of works aimed at increasing soil fertility of the Vologda Oblast agricultural land

Indicators	Year						1990 to 2011, fold
	1990	1995	2000	2005	2010	2011
Organic fertilizers input
Total, thousand tons	7770	3695	1653	1249	922	936	8.3
Per 1 hectare of crops,	10.1	5.5	2.6	2.5	2.3	2.5	4.0
Mineral fertilizers input (as calculated to 100% of nutrients)
Total, thousand tons	118.4	22.5	26.3	14.7	13.7	15.8	7.5
Per 1 hectare of crops, kg of active substance	144	32	42	28.5	34.0	41.5	3.5
Liming of acid soils
Total, thousand hectares	108.0*	8.8	4.7	2.2	1.4	0.8	135
* In average for the period of 1986 – 1990.

Table 3. Dynamics of investments in the fixed capital of the Vologda Oblast agroindustrial complex in 2000 – 2011, mln. rubles (in actual prices)

Indicators	Year							2011 to 2000, fold
	2000	2001	2002	2005	2008	2010	2011
Investments in the agroindustrial complex, total	745.8	973	1024.6	2406.4	3196.6	2845.0	3029.0	4.1
Including agriculture	435.2	593.4	775.8	1075.6	2242.9	1765.5	2153.5	4.9
Share of agriculture, %	58.4	61.0	75.7	44.7	70.2	62.1	71.1	х

The problem of capital assets renewal and provision of equipment. The investments in the fixed capital of agriculture in 2010 – 2011 grew to a lesser extent than in other sectors of the Oblast’s agroindustrial complex.

Dynamics of investments, as shown in table 3 , is presented in current prices of each year, and in the comparable estimation the growth of investments is not detected.

The volume of investments in the fixed capital of agriculture significantly lags behind the requirements, necessary for the restoration of the deteriorating funds (first of all, agricultural machinery) and their quality renovation (tab. 4).

Due to the high costs of the machinery and equipment, the level of agricultural enterprises’ technical equipping is decreasing, which leads to the untimely and low-quality seasonal field works, non-observance of technologies and, ultimately, low productivity of agricultural crops.

The problem of human resources availability. Despite the fact that in rural areas there is a considerable number of unemployed able- bodied population, agricultural enterprises experience the shortage of qualified personnel of all categories – from managers to workers (tab. 5).

As of the beginning of 2012, only 54% of household managers had a higher education, and 13% of them did not even have a specialized education. From 3793 actually working professionals 2395 persons (63%) do not have a higher education, 453 persons (12%) are of the retirement age. The greatest shortage of the leading specialists is registered among agronomists, economists and zootechnicians.

The shortage of qualified specialists in the Oblast’s agricultural sector, current as well as anticipated in the mid-term perspective, is determined by a rather tough intersectoral competition and the sector’s low competitiveness in the labour market (wages in agriculture in 2011 equaled 69% of the average Oblast level). In this respect, the state should implement the system of cardinal measures aimed at the provision of social guarantees and benefits to the graduates of universities, technical schools and other educational establishments [4, 8].

Table 4. The availability of technical means in the Vologda Oblast agricultural organizations, units at the end of the year

Types of machinery and equipment	Year								2011 in % to 2000
	2000	2001	2002	2005	2008	2009	2010	2011
Tractors	10417	9686	9218	6722	5055	4699	4397	3907	37.5
Seeders	1527	1315	1246	1083	788	731	690	549	36.0
Combine harvester threshers	1458	1361	1321	937	698	655	579	554	38.0
Flax harvesters	307	246	218	109	74	76	64	60	19.5
Forage harvesters	886	906	892	729	539	539	496	436	49.2
Pickup balers	1108	1061	1023	775	568	526	516	462	41.7

Table 5. The need, availability and shortage of managerial personnel and specialists in the Vologda Oblast agricultural organizations as of January 1, 2012

Position	Staff requirement, persons	Availability, persons	Shortage, persons	Staffing level, %
Managerial personnel and specialists, total	4636	4345	291	93.7
Including: - directors of an organisation	247	245	2	99.2
- main specialists, total	993	887	106	89.3
Among them: agronomists	134	105	29	78.4
Zootechnicians	169	154	15	91.1
Veterinarians	125	111	14	88.8
Engineers	159	147	12	92.5
Economists	114	93	21	81.6
Accountants	226	220	6	97.3
Others	66	57	9	82.6
- specialists of all fields (excluding main)	2109	1984	125	94.1
- middle managers	750	726	24	96.8
- personnel management employees	95	91	4	95.8
- others	442	412	30	93.2

The problem of high production costs in agricultural enterprises. The production and sales costs in the Oblast’s agricultural enterprises per unit of production, due to a number of objective and subjective reasons, are significantly higher than the selling prices, which results in unprofitability and low cost-effectiveness of agricultural production (tab. 6) .

This is mainly caused by the yearly increasing disparity of prices for production resources and agricultural products.

Due to the unfavorable market price ratio of agricultural production and material-technical resources used in this sector, agricultural enterprises have to attract credits and loans in increasing amounts.

This results in the growing debt of enterprises. For example, accounts payable for the period from 2000 have increased 2.9-fold (from 1636.5 million rubles to 4728.0 million rubles at the end of 2011), indebtedness under short-term credits and loans – 59-fold (from 86.3 million rubles to 5088.3 million rubles, respectively), long-term liabilities on credits and loans of industrial enterprises – 17.9-fold (from 381.2 million rubles to 6812.3 million rubles, respectively).

By the end of 2011, the Oblast’s agricultural enterprises, that submitted the financial accounts to the Department, have received the revenue from the realization of products, works and services in the amount of 15.4

Table 6. The ratio of production costs and selling prices for the main types of agricultural products in the Vologda Oblast, rubles/t

Type of production	2010				2011
	О ^	СО	CD VD .У О ^ 1	о ^ □) ° i 1 со	■О	(Л	CD VD	i 1 со
Grain	7141	5142	- 1999	- 4.9	6475	6355	-120	4.8
Potato	5062	8908	+ 3846	51.1	4209	12103	+7894	97.8
Milk	11507	14979	+3472	21.5	12891	16988	+4097	20.1
Cattle meat	105827	56132	- 49695	- 32.5	120357	65695	-54662	- 29.6
Pork meat	64905	68959	+4054	13.0	77571	69742	-7829	- 8.1
Poultry	42466	57861	+15395	18.2	49593	70572	+20979	4.8
Eggs, rub./1000 pcs.	2060	2309	+249	20.6	2072	2308	+236	21.1

Table 7. Dynamics of the quality of raw milk, sold by the Vologda Oblast enterprises

Indicators Years 2011 +,-to 2000 2000 2005 2006 2009 2010 2011 Total amount of milk sold, thousand tons 282.6 360.7 382.4 403.0 392.3 410.3 +127.7 Including: highest grade and 1st grade, % 84.6 95.3 93.8 88.8 94.6 95.3 +10.7 2nd grade, % 14.4 4.5 5.8 10.7 5.2 4.6 -9.8 billion rubles (117% to the level of 2010); pre-tax profit equaled 0.65 billion rubles (83.8%), including at the expense of subsidies charged to the profit – 1.06 billion rubles; cost-effectiveness +4.5% including the subsidies and – 2.8% excluding the subsidies. Thus, without the state support, the sector remains unprofitable [7, 9].

The problem of the manufactured and sold products quality. The quality of the products significantly affects their selling price. However, so far the sold products quality remains unstable (tab. 7) .

Russia’s accession to WTO requires improving the quality of sold products. This will largely depend on its competitiveness in the food market and, consequently, the prospects of the agricultural organizations [2].

The problem of the agricultural enterprises insolvency. The total share of insolvent enterprises of the 3rd group (insolvent, requiring non-market measures to improve their financial and economic status), the 4th group (insolvent and unable to manage the assets) and the 5th group (bankrupt enterprises, without commodity production) in the total Oblast indicators equals: by the number of enterprises – 39.9%, by the number of employees – 39.6%, by the ploughland area – 43.2%, by the cost of basic production assets – 41.1% (tab. 8).

Thus, almost 40% of the Oblast’s farms are insolvent, requiring a certain form of state support. Given the conditions under which the agricultural enterprises function if Russia joins WTO, the additional measures aimed at reducing the number of unprofitable and insolvent enterprises should be determined and implemented [4, 5].

The problem of agricultural development in the Oblast’s peripheral areas. As a result of the action of market mechanisms, given the imperfection of the state regulation measures, the territorial differentiation in the Oblast’s agricultural development has increased sharply.

Table 8. The number of Oblast’s insolvent agricultural enterprises and their provision with basic resources as of January 1, 2011

Indicators	Total in the Oblast	Including insolvent enterprises				Share of enterprises of the III, IV, V groups in overall Oblast indicators, %
		III group	IV group	V group	III, IV, V groups in total
Number of enterprises	258	40	53	10	103	39.9
Number of employees, thousand persons	22.3	4.5	4.3	0.03	8.83	39.6
Ploughland area, thousand hectares	437	91.9	91.7	5.3	188.9	43.2
Cost of main production assets, mln. rubles	18967	4376.6	3416.2	0.7	7793.5	41.1

Table 9. Indicators of territorial differentiation in the development of the Vologda Oblast agriculture in 1990 and 2010

Districts	Share of districts in the oblast indicators, %
	Area of agricultural land		Value of gross production		Pretax profit of agricultural enterprises		Subsidies allocated to the revenues of agricultural organizations
	1990	2010	1990	2010	1990	2010	1990	2010
Suburban districts: Vologodsky, Gryazovetsky, Cherepovetsky, Sheksninsky	28	29	50	62	46	77	х	65
The rest 22 oblast districts	72	71	50	38	54	23	х	35
In the oblast on the whole	100	100	100	100	100	100	х	100

In 1990 the agriculture of four suburban districts (Vologda, Gryazovets, Cherepovets and Sheksna) produced 50% of the gross output and received 46% of profit, and in 2010 these indicators reached 62 and 77%, respectively, taking into account profitable farms. In 2010 the agricultural enterprises of these four districts received from the budgets of all levels 65% of the subsidies charged to profit (tab. 9) .

In turn, the remaining 22 districts, with 65% of the rural population, account for only 38 % of the agricultural output and receive 35% of the state support.

22 peripheral areas account for only 39% of milk and 12% of meat and poultry, sold by the Oblast’s agricultural organizations.

The agriculture in the half of these regions experiences the process of uncontrolled transition to the extensive way of development and the gradual elimination of some of its branches. The economic activity is connected exclusively with dairy livestock breeding in 18 districts of the oblast. At the same time, in 11 districts the cow density equals less than 10 head per 100 hectares of agricultural land, and in the Babushkinsky, Vytegorsky and Kaduysky districts there are not more than 3 dairy cows per one agricultural worker.

While in the suburban areas investments in fixed capital are growing, advanced technologies are being implemented, large-scale investment projects are being realized, incentives for further agricultural development are being created, the most part of the rest of the oblast’s territory experiences the deterioration of agricultural commodity production, that is the rural population employment basis and income source, this state of events will provoke the aggravation of the crisis situation.

The agricultural production volumes decrease in peripheral areas leads to the growth of fixed costs per unit of production, underutilization of processing enterprises’ available capacity, unprofitability and cessation of production activity of some of them and, ultimately, to undesirable social consequences.

Food security issues

Food security is ensured, if:

– foodstuffs are available on the market in the amounts, sufficient for providing the population with the recommended consumption rates;

– population’s real incomes allow consuming foodstuffs in recommended rates;

proper quality of foodstuffs presented on the market is ensured [6].

Table 10 presents the data on production and consumption of basic food products per capita for the oblast. It can be seen, that for a number of products consumption lags behind the standards [1, 6, 8].

In solving the food security problems of the oblast’s inhabitants, a special role belongs to meat and dairy industry as the vital sphere of the agro-industrial complex. According to the Vologdastat (regional authority of the Russian Federal State Statistics Service) these branches provide 62% of the oblast’s volume of commodity production of foodstuffs.

Annually, the oblast’s population consumes:

• ♦    148 thousand tons of whole-milk products (in milk equivalent), 91% of which are produced in the Vologda oblast;

• ♦    4.6 thousand tons of butter, 54% of which are produced in the Vologda oblast (import of butter from other regions equals 46% due to the influence of the price factor);

• ♦    4.3 million of standard cans, 88% of which are Vologda products;

• ♦    5.2 thousand tons of cheese, 17% of which are produced in the Vologda oblast (import of these products equals 83% due

to the absence of necessary capacities for their production).

The oblast’s meat market peculiarity lies in the fact that its main volume (90% are the sausage products and semi-finished products) consists of the finished foodstuffs of local production. At the same time, 56% of the imported raw meat is used for sausage and semi-finished foodstuffs production.

As for the other food products, the oblast population’s actual provision with internal resources (taking into account the export) equals: 64% for eggs and egg products, 98% for potato, 46% for vegetables and melons, 10% for fruits and berries, 14% for food grain, 71% for flour, 70% for bread and bakery products, 13% for fish and fish products.

One of the most important products, which are not produced in sufficient amounts in the oblast, is food grain, used for flour production. The import of this type of product is 95 – 100%. In addition, the oblast imports fodder grain – up to 70% of the required amount.

The delivery contracts for the foodstuffs, not produced in the oblast, like sugar, salt, cereals, vegetable oil, are concluded directly by the economic entities of wholesale trade. They also determine the price and assortment policies.

In the period of economic crisis they were recommended to retain the two-month supply of these goods. The Department, in turn, carries out the monitoring of commodity stocks of foodstuffs with long-term storage period, imported into the oblast, as on the first day of each month.

Table 10. Production and consumption of basic food products per capita in the Vologda Oblast in 2010, kg

Products	Production	Consumption	Rational norm	Consumption, in % to the norm
Milk and milk products	368	237	320 – 340	72
Meat and meat products	42	66	70 – 75	91
Eggs and egg products, pcs.	488	318	260	199
Potato	144	86	95 – 100	89
Vegetables	44	96	120 – 140	74

According to the information of the Department of International, Interregional Ties and Tourism, the Vologda Oblast has bilateral agreements with 33 different subjects of the Russian Federation, it also signed an agreement with the Republic of Belarus. In cooperation with each RF subject the joint measures for these agreements implementation are being developed, that envisage the cooperation in the agro-industrial complex and the supply of food products to the regional markets.

Organizing agricultural fairs is considered very important in the provision of the oblast population with basic foodstuffs at affordable prices. Thus, in 2010, 89 agricultural fairs were organized and their total trade turnover amounted to 156 million rubles.

In 2011, 83 agricultural fairs with a total turnover of 126.5 million rubles were held in 20 municipalities. The average number of trade outlets was 60. According to the oblast local self-governing bodies, the average prices at fairs are 12% lower in comparison with the prices at fixed shop retailing.

Certain importance in the formation of the permanent distribution of agricultural products belongs to agricultural retail markets. This segment of the consumers market is extremely important for organizing the channel of direct (bypassing the wholesale link) supplies of agricultural products to the consumers.

At present, 27 markets are included into the retail markets register. As of January 1, 2012 the total number of market stalls at them was 2598, out of which 37.3% (969 places) were unoccupied. 6 markets out of 27 are retail agriculture markets, 3 of which were opened in 2011 (in the Ust-Kubinsky, Kichmengsko-Gorodetsky and Syamzhensky municipal districts). In 2012 two more agricultural retail markets (in the Kharovsky and Mezhdurechensky districts) are planned to be opened.

In the present-day conditions, among the acute issues is the provision of the remote rural settlements with socially important foodstuffs that is solved by organizing the itinerant trade.

The Oblast Department of Agriculture, Food Stocks and Trade takes the following measures to solve the above stated problems that the agro-industrial complex faces:

The most acute problem of the Vologda Oblast agriculture (which will become even more urgent when Russia joins WTO) is the significant debt load of agricultural producers. Even now the subsidies allocated to a region for the purpose of compensating the part of expenses to pay interest on loans constitute the main part of state support from the federal budget.

On the whole, in Russia the amount of loan debt in agriculture (data of the RF Ministry of Agriculture) exceeds 1 trillion 500 billion rubles, as for the Vologda Oblast, the agricultural enterprises’ total loan debt by the end of 2011 exceeded 11.9 billion rubles, which equals almost 77% of the annual gross revenue. About 8% of the revenue is spent annually on interest payments on loans and credits (that is 1.1 – 1.2 billion rubles per year are withdrawn from circulation, and are compensated from the budget partly and after the costs are effected).

In order to increase the domestic agroindustrial complex competitiveness in the conditions of Russia’s accession to WTO, the proposals to the Chairman of the Government of the Russian Federation (letter No. 01-33/388 dated March 3, 2012) were sent concerning the revision of the mechanisms of allocating subsidies for payment of interest on loans and credits.

If the federal budget compensated directly to the credit institutions the shortfall in their revenues from the loans and credits granted to agricultural enterprises (similarly to car loans – the RF Government Resolution No. 244 dated March 19, 2009), the agricultural producers would significantly reduce their expenditures for loan servicing and would be able to direct their financial resources to other purposes (wages, taxes, settlements with creditors).

Table 11. Ongoing long-term target programs in the Vologda Oblast agroindustrial complex

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In 2011, the Oblast Government approved the Strategy of the Vologda Oblast agroindustrial complex and consumer market development up to 2020 [8].

Currently, the Department of Agriculture, Food Stocks and Trade is elaborating the State programme on the development of the Oblast agroindustrial complex for 2013 – 2020.

The main sections of the Programme and the guidelines of support correspond to the State Programme of the RF Ministry of Agriculture. The discussion and defence of the Pro- gramme will be held in the Oblast Government before August 1 of the current year.

At present, 10 long-term target programmes are being implemented in the oblast (tab. 11) . It is envisaged to allocate 455.1 million rubles for their realization from the Oblast and Federal budgets. On the whole, in 2012 it is planned to allocate 1130.7 million rubles from the Federal and Oblast budgets for the support of agriculture. Thus, the Oblast possesses quite a firm basis for ensuring food security and significant reserves for the development and increase of agricultural sector efficiency.