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The table shows that prices for bread, meat and meat products, fish and fish products and sugar grew at the highest rate. Their growth probably determined the decrease of sales that in its turn entailed smaller output of these products. In any case sugar and confectionery, fish and fish products, meat and meat products and bread, i.e. products prices for which were up, are among the items demonstrating decrease of sales (Table 5). Production of these products has also experienced the biggest drop Table 3. The exception is processed and canned fish products. But it would not be quite correct to make conclusions on the basis of available information about canned fish products since not only domestically processed fish is sold but also large volumes of imported ready-for-marketing products.

http://www.gks.ru/bgd/free/B04_03/IssWWW.exe/Stg/d04/ind-z.htm Calculations were made using the international classification COICOP (less alcoholic and alcohol-free beverages).

Section The Real Sector Table Index of consumer prices for basic food products in December 2009 as % of December Sugar, Dairy Bakery Meat jam, Fish and prodproducts and Fats and Vege- honey, Total sea ucts, Fruit and meat oils tables chocoproducts cheese cereals products late and and eggs sweets Russian Federation 104 103.6 106.2 110.7 99.6 94.1 100.5 99.0 Countries of the EU 99.0 99.5 100.2 99.9 97.7 96.9 98.6 95.4 101.(EU-27) Source: Rosstat.

3.5.4. Import of agricultural and food products in the crisis period According to Rosstat data1, in July-September 2009 the share of imports in the total resources of food commodities amounted to 34%, i.e. was the same as in the corresponding period of 2008. At the same time imports of basic food products were falling (Table 7).

Table Imports of selected food products including those for processing in Million US dollars As % of Total 26580 85.including Meat, fresh and frozen 1253 Poultry meat, fresh and frozen 851 80.Fish, fresh and frozen 705 90.Milk and dairy products 418 96. including dry milk 57.5 79.butter 93.0 84.cheese and curds 261 109.vegetables 2364 90.sunflower oil 41.2 38.raw sugar 1218 51.Source: Rosstat.

In 2009 imports of all food products (except cheese and curds) decreased. The most affected were purchases of sunflower oil (down about 61%), raw sugar (about 48%), dry milk (about 20%), poultry meat (about 20%) and butter (about 15%).

The comparison of data about sales of basic groups of food commodities (Table 5) with the data about their imports (Table 7) brings to the conclusion about a gradual substitution of domestic products for the imported ones. For instance, sales of meat products reduced by 7.5% while imports of meat were down 16%, sales of poultry meat remained actually the same as in the previous year (100.1%) while its imports decreased by 20%. The sales of sugar were down 5.9% while imports of raw sugar fell by 48%. The sales of vegetable oils grew by 4.2% while their imports dropped by almost 61%. The sales of butter reduced by 2% while their imports by almost 15%. Such a discrepancy cannot be entirely attributed to the difference between the declared customs values and the values in retail prices since the fact of import substitution is proved by a gradual shrinkage of imports share in personal and production consumption. For instance, in 9 months 2009 this indicator for meat and meat products http://www.gks.ru/bgd/regl/b09_01/IssWWW.exe/Stg/d10/2-2-1.htm RUSSIAN ECONOMY IN trends and outlooks equaled 32.3% as compared with 34.5% in 2008, for milk 16.4% versus 18.8% in the previous year1.

At present the weakening of ruble has less effect on import substitution since its scale is much smaller than during the previous crisis. The growth of domestic production plays a bigger role in reduction of vegetable oils and meat products imports. Larger domestic output of meat is due to the development of short-cycle livestock sub-sectors (poultry and pig production) in corporate farms. The reduction of dairy products imports was largely determined by the enforcement of Technical Regulation for milk, higher import duties on milk and growing domestic production.

The substitution of domestic products for imports has some limitations not related to the volume of domestic output. The produce of households, individual private farms and most corporate farms is non-standard and not suitable for forming relatively large lots of homogeneous products. Catering and trade enterprises prefer to reduce costs and work with lots of primarily processed homogeneous products. For instance, catering enterprises need semicooked products the daily lots of which should be identical by quality parameters. The situation is similar with raw inputs for producing semi-cooked, sausage and canned products. The lack of standard, homogeneous and partially processed products wont make these entities buy heterogeneous products without primary processing from households, individual private and corporate farms. With regard to this one has to improve interaction between domestic producers and processors, to enforce contract mechanism ensuring production of homogeneous products in compliance with the contract terms (by means of providing seeds, technologies, consultations and equipment in exchange for guaranteed supply). It would be rational to provide state support to processing enterprises using contract agreements with agricultural entities similar to the one granted to farm producers.

3.5.5. Changes in agricultural policies in the crisis conditions One of the key steps for agricultural policy development and improvement of support to the farm sector was the adoption of State program for agricultural development and regulation of agricultural and food markets in 2008-2012 (hereinafter referred to as the State program) approved by the RF Government Resolution No. 446 of July 14, 2007.

In 2009 because of the global financial crisis some revisions were made in the State program. Under the Programs provisions and in the framework of the Governments anti-crisis plan 183 billion rubles were allocated from the federal budget to the support of agrifood sector which is 30% above the 2008 indicator.

In the framework of the Governments anti-crisis plan Russian agrifood sector has additionally got 87 billion rubles2. These funds were used for the following purposes:

enlargement of authorized capital of open joint-stock company Rosselkhozbank 45 billion rubles;

enlargement of authorized capital of open joint-stock company Rosagroleasing 25 billion rubles;

subsidizing of interest rate on credits 17 billion rubles.

Calculated using data of Rosstat.

The report of RF Minister of Agriculture E.B.Skrynnik at the session of the Federation's Council in November 2009.

Section The Real Sector So, while in 2008 54% of budget funds under the State program were allocated to efforts for improving agricultures financial sustainability, in the crisis period priority was given to the enlargement of authorized capitals of Rosselkhozbank and Rosagroleasing 36% (Picture 8). Meantime the share of such an important component as Sustainable development of rural areas including improvement of rural social infrastructure has notably decreased as compared with 2008 (from 20% to 8%).

Authorized capitals of Rosselkhozbank and Rosagroleasing 36% Attaining of financial Regulation of sustainability markets 34% 2% Development of priority sub-sectors Sustainable 11% development of rural Creation of general areas conditions 8% for farming 9% Fig. 8. Structure of budget expenditures by components of the State program in According to preliminary data of the RF Ministry of Agriculture in 2009 most financial commitments under the State program were met in full (Table 8) and some efforts got even more funds than planned (subsidizing of elite seed breeding, partial compensation of expenditures on crop insurance, subsidizing of interest rate on credits). On the contrary, financing of measures to support rape and flax production has notably reduced.

Table Basic financial parameters of the State programs implementation as of January 1, Financing from the federal budget, thousand rubles Efforts Annual plan planned actual 1. Efficiency indicators 1.1. Index of agricultural production in farms of all types as % of the previous year (in comparable 8.3 prices) 1.4. Index of physical volume of investments in 82.0 agricultures fixed capital, % 1.5. Disposable monthly incomes of rural house- 8 928.0 RUSSIAN ECONOMY IN trends and outlooks Financing from the federal budget, thousand rubles Efforts Annual plan planned actual holds, rubles per one member of household 1.6. Share of domestic output in available resources of 1.6.1. meat and meat products, % 63.5 1.6.2. milk and dairy products, % 79.2 2. Sustainable development of rural areas 2.1. Construction of dwellings for rural residents 1 050 total, thousand square meters 2.1.1. including those for young families and 540 young specialists, thousand square meters 2.4. Financing of measures to improve social and 8 117 800 8 099 engineer infrastructure in rural settlements 3. Creation of general conditions for farming 3.1. Prevention of agricultural lands abandoning, 850 thousand hectares 3.3. Subsidies to farm producers for the purchase of 9 690 000 9 690 mineral fertilizers 4. Development of priority agricultural sub-sectors 4.1. Development of livestock production 4.1.1.Production of slaughter livestock and poultry 9 520 (live weight), thousand tons 4.1.2. Production of milk, thousand tons 32 600 4.1.5. Subsidies to support purchase of pedigree 5 577 200 4 835 livestock 4.1.6. Supply of pedigree livestock through 30 000 Rosagroleasing, thousand heads 4.1.7. Supply of equipment for livestock production 65 000 through Rosagroleasing, thousand stalls 4.2. Development of crop production 4.2.2. Subsidizing of measures to support elite seed 484 900 550 breeding 4.2.5. Financing of measures to support farm pro 400 000 375 ducers in Extreme North regions 4.2.8. Financing of measures to support flax pro 587 151 152 duction 4.2.11. Financing of measures to support rape pro 613 350 132 duction 4.2.14. Financing of measures to establish perennial 884 430 789 plantations 5. Attaining of agricultures financial sustainability 5.1. Volume of subsidized short-term credits 149 400 000 (loans) 5.2. Subsidizing of interest rate on short-term cred 14 900 000 16 647 its (loans) 5.3. Volume of subsidized investment credits with 91 700 000 up to 8 years term 5.4. Subsidizing of interest rate on investment 40 813 252 41 318 credits with up to 10 years term 5.5. Volume of subsidized credits issued to small35 000 000 holder farms 5.6. Subsidizing of interest rate on credits (loans) 6 027 200 5 984 issued to smallholder farms 5.7. Purchase of tractors by all types of farms, units 29 000 5.8. Purchase of grain harvesters, units 9 000 5.9. Purchase of fodder harvesters, units 3 500 5.10. Share of insured crop area in the total culti29 vated acreage, % 5.11. Subsidies for partial compensation of expen 2 000 000 2 494 ditures on crop insurance TOTAL 90 719 283 99 679 Source: RF Ministry of Agriculture.

The sectors credit portfolio exceeded 300 billion rubles including newly received shortterm credits to the amount of 235.4 billion rubles, investment credits 95 billion rubles, credSection The Real Sector its to smallholders 41.3 billion rubles (Picture 9). In 2009 farm producers preferred to take short-term credits since in the crisis situation they feared to take investment ones.

Total amount of Short-term Investment Credits to small- credit credits credits holders resources Fig. 9. Credit portfolio of the agrifood sector in 2008 and 2009, billion rubles The principal creditor of agricultural producers was Rosselkhozbank from which they received 207 billion rubles of credit resources (43% of their total amount). From its establishment in 2000 the bank issued 859 billion rubles of credits to agricultural entities and rural residents and formed the second by its extensiveness net of territorial branches including regional divisions and 1414 additional offices.

With the aim to strengthen support to the sector the Government adopted resolutions about prolongation of credits with subsidized interest rate:

short-terms credits extension for 6 months;

investment credits extension for 3 years (i.e. the maximum term of investment credits is extended from 8 to 11 years).

The crisis resulted in much smaller demand for farm machinery. In late 2008 early its sales to agricultural producers dropped 4-5 fold.

By the end of 2009 the situation improved: Rosagroleasing used the funds allocated from the federal budget for purchasing and supplying to farms 15 thousand units of home-made agricultural machinery and highly productive pedigree livestock and for modernizing livestock keeping facilities. According to preliminary estimates 14 thousand tractors (48.3% of the plan), 6 thousand grain harvesters (66.7%) and 1.5 thousand fodder harvesters (42.9%) were to be bought in 2009. Only 10 out of 80 constituent members of the Russian Federation report that they will fully attain the goals of technical renovation set by the State program:

Voronezh, Tambov, Pskov and Astrakhan oblasts, Krasnodar kray, Republics of Bashkortostan, Ingushetiya, Karachaevo-Cherkessiya and Saha (Yakutiya), the Jewish autonomous district. The term of machinery and equipment leasing was extended up to 15 years, the term of advance payments by 12 months.

RUSSIAN ECONOMY IN trends and outlooks The main causes of weaker investment activity and smaller machinery purchases are:

lower prices for basic agricultural outputs grain and milk; poor profitability of farms; higher prices for farm machinery (tractors, harvesters, livestock equipment); scarcer financing of the program activities from the regional budgets due to the shortage of funds; worse access to credits, high credit indebtedness of farms, lack of collateral and drought in 15 regions.

The government commission on systemically important entities has designated 37 agribusiness enterprises eligible for government guarantees to the amount of 45 billion rubles, of which 17.5 billion rubles have already been granted to 7 such enterprises.

So, the policies of prioritizing support to monopolists including Rosselkhozbank and Rosagroleasing were carried on in 2009.

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