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For instance, the top 100 companies account for the following shares in output: grain - 4% before the crisis and over 8% after the crisis, sugar beets less than 15% and over 20%, respectively. This concentration is even more vivid in livestock production. Before the crisis the top 50 companies produced 15% of poultry, today over one half; the top 100 pig producers accounted for 22% of output before 1998, presently also for over one half. According to estimates of V.Uzun12 slightly over 40% of financially viable farm producers account for about 75% of the sectors commodity output (in 42% of farms were profitable, in 2003 49%). The research of M.Grazhdaninova13 showed that about one half of agricultural producers is situated on the production possibility frontier while the other half is within this frontier. In other words, the output produced by one half of farm producers using available resources is much smaller than the one currently possible in Russia (i.e. the one produced using similar resources by the other half of producers). Investments grow both in agriculture and food industry. In case the agrifood sector really plunged into a crisis, it wouldnt attract capital. But given the above mentioned dichotomy of the sector, it becomes clear that investments are made in its efficient part.

Moreover, production of farm machinery again started growing. Since its export is very limited, this supplement is consumed by the domestic market. Machinery is also purchased by the part of agricultural producers who are most efficient and dynamically developing.

One can draw some conclusions about these producers on the basis of foreign investments dynamics. In the past two years the share of portfolio investments in agriculture noticeably grew quite a strange phenomenon for traditional farming since shares of major producers are not quoted on the stock market. The matter is that new farm producers named agriholdings emerged in Russia. These are large corporations that among others have agricultural departments in their structure. Shares of such holdings are quite quotable on stock markets, some of them even on the world markets (e.g. those of Wimm-Bill-Dann company). The second non-efficient part of farm producers gradually shrinks.

Some of these enterprises simply get closed, others either raise efficiency or get into more efficient hands and thus also become more efficient. Before 2003 the number of agricultural enterprises grew, first of all due to the creation of parallel entities to which non-indebted assets were transferred. Lossmaking farms were the primary initiators of such new farms foundation, and accordingly the share of loss-making entities was growing. In 2003 the number of loss-making farms reduced by 2800: on the one hand, price parity improved helping 1500 more farms to end the year with positive balance and, on the other hand, 1300 failed farms (or 4.5%) were liquidated. As a result the share of profitable farms grew. As mentioned above, the bulk of liquidated farms are a kind of bridge enterprises intended to solve the problem of indebtedness. However, in the current situation mass bankruptcy of marginal farms will soon start leading to their liquidation. The developments in recent years show that agrarian protectionism fails to solve the problem. Thus the present-day agricultural policies should be urgently retargeted at solving problems of this part of agriculture, or, to be more exact, of the former agriculture. First of all, the problems of re-employment and social rehabilitation of people in these areas as well as of efficient use of other released factors of agricultural production should be addressed.

V.Uzun. Large and small business in the Russian agriculture: adjustment to market and efficiency. Moscow, 2004. Proceedings of IET conference Social and economic transformation in the CIS countries: achievements and problems held on September 13-15, 2004. Mimeo. See:

http://www.iet.ru/afe/old_confer.html#2004_09_13.

M.Grazhdaninova. Factors of agricultural production efficiency in the Russian transitional economy. Ph.D.

dissertation paper. 2004, IET.

---Source: Federal Service of State Statistics.

Picture 1. Russian agriculture: percent change of annual output in 1985-----Source: Federal Service of State Statistics.

Picture 2. Russian food industry: percent change of annual output in 1986-1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 I-VI ---exports imports balance * - less trade with Byelorussia.

Source: Customs statistics of RF foreign trade.

Picture 3. Foreign trade in agricultural and food items, million US dollars* I-X,I-X,1986-120 100 80 60 40 20 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 grain (left axis) sugar beets sunflower seeds Source: Federal Service of State Statistics.

Picture 4. Gross output of basic farm crops, million tons I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX 2003 Livestock and poultry (live weight) Milk Source: Federal Service of State Statistics.

Picture 5. Production of basic livestock products as % of the previous month E. Serova, O. Shick, N. Karlova, T. Tikhonova Foreign trade In the conditions of favorable world market conjuncture and strengthening the national currency. a growth trend is continued of the Russian foreign trade turnover. Over the past 15 years, the record indicators for the foreign trade of Russia were shown in September of 2004. The growth of export can equally be explained by favorable price dynamics and increase in the actual volume of export. The key factors of growth of import are primarily, the growth of real disposable incomes of population and enterprises, and also ruble strengthening.

The new measures to stimulate the motor industry, developed by the Russian Government, will be directed not so much to the support of domestic manufacturers as to foreign-made car assembly enterprises. Till the end of the year the customs taxation of car components will be changed.

At the end of November, the Central Bank decided to radically reduce the mandatory sale standard of export earnings from 25% to 10%.

In September 2003, the foreign trade turnover of Russia, calculated according to balance of payment methodology, increased by 40.6% (USD 24.6 bn), as compared to the same period of last year. In comparison with the August this year, the indicator increased by 1.2%. In September, the volume of export made up USD 16.5 bn, which is higher the same indicator of last year by 42,5%. In September, the import exceeded the same indicator of 2003 by 25,2% and made USD 8.1 bn. In September 2004, the positive balance increased to USD 8.4 bn vs USD 5.1 bn. In the same month of previous year.

-1997 1998 1999 2000 2001 2002 2003 Balance Export Import Source: Goskomstat of the RF, Central Bank of the RF Figure 1. Major Indices of the Russian Foreign Trade As before, the main export growth factor was high prices of the main raw commodities of Russian export, especially - energy sources.

In January this year the average oil price of Urals was USD 28.9/barrel, in June USD 32.1/barrel (growth by 11,1%), in September USD 38.1/barrel (growth by 31,8% as compared to January). The monthly average oil price of this grade for January-September this year made up USD 33.1/barrel (growth by 23,1%, as compared to the same period of 2003).

Based on the two months monitoring for Russian raw materials in the world markets, oil export duty is reviewed bimonthly. Since October 1, the duty was raised to all-time high USD 87.9/t. Since December 1, the oil export duty from Russia will fix a new record and make up USD 101/t.

In September the oil prices at New York Exchange exceeded USD 50 and reached USD 50.47/barrel. As before, the oil market still remains critical, and no substantial price reduction is expected in the nearest future.

The prices of Russian natural gas remained high. A compared to the same period of last year, the average contract price for the none months of the current year increased by 0,8 percent.

In September 2004, the prices of major non-ferrous metals have changed at the market as follows.

The average price of nickel was USD 13298/t (as compared to August last year, reduction by 3,1%).

Basically, drop in price s concerned with lessening of demand on the part of its major consumers stainless steel manufacturers. At the same time, the average price of nickel increased in the third quarter of 2004 (compared with the second quarter of 2004) by 11,6%, and made up USD 14020/t.

Price of aluminum made up USD 1726/t (growth by 1,9%). In the third quarter of 2004 the average price of aluminum reached USD 1710/t, which by 2% greater than in the second quarter. It is expected that demand for aluminum will exceed its production this year chiefly at the cost of growth of demand on the part of purchases in the USA and China. The high level of prices is also supported by the data on cutdown of stock arrearage of aluminum.

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Besides the growth of demand on the part of China, the cause of rising of prices in the world aluminum markets can be explained by the fact that for the past 10 years the influx of investments into aluminum industry was inadequate and this sector cannot provide the growth of demand.

The average price of copper in the third quarter of 2004 was USD 2852/t, which is by 2,2% higher than in the second quarter. An upward trend in copper prices is observed about a month already in the world markets. Panic buying on the metal provokes a steady decline of the stock arrearage. In the nearest future rise in copper prices may be continued under the influence of growing demand for this metal in various regions of the world, chiefly, on the part of the largest importers the U.S. and China.

But, due to growth retardation of Chinese economy, the demand for metals in the next months will be somewhat lower than expected not long ago. At the same time, the volume of supply is limited on many markets, and this inevitably directs price up.

According to the Bank of Russia, an increase of the world prices on the staple Russian export in January-September 2004, compared with the same period of 2003, made up, on average, 16,8%. The conditions of the Russias trade with foreign countries in January-September 2004 (as compared to January-September 2003) improved due to outrunning price advance on the goods exported from the country.

Table Monthly Average World Prices in September of Corresponding Year 1996 1997 1998 1999 2000 2001 2002 2003 Oil (Brent), USD/barrel 22.9 18.12 13.1 22.6 32.15 26.18 28.26 27.1 42.Natural gas, USD/mln. BTU 2.743 2.251 1.858 2.62 5.118 2.204 3.625 4.678 5.Gasoline, USD/gallon 0.648 0.579 0.421 0.683 0.941 0.757 0.797 0.832 1.Copper, USD/t 1932.6 2032.7 1676.4 1876.8 2037.5 1452.9 1498.3 1816.4 2892.Aluminum, USD/t 1428.3 1544.6 1391.3 1493.6 1600.2 1342.6 1294.7 1415.0 1726.Nickel, USD/t 7426.4 6523.6 4229.8 6932 8654.3 5040.9 6592.5 9996.1 Source: based on the data of the London Metal Exchange, International Oil Exchange (London) At the heart of growth of the Russian import rests continuation of real strengthening of ruble against the dollar, and high, though somewhat slowed down in the third quarter, indices of economic growth. In real terms, in September of 2004, compared with previous month, ruble strengthened against the U.S. dollar by 0,2%, with regard to Euro the ruble rate of exchange practically unchanged. As compared to December of 2003, in September of 2004, the real strengthening of ruble to the U.S. dollar made up 5,6%, to Euro 7,6%. The real effective rate of exchange of ruble to currencies of the countries major trade partners of the Russian Federation in September of 2004, compared with previous month decreased by 0,1%, relative to December 2003, raised by 5,3% Continuing economic advance and a relatively slight inflation contributed to an increase of the real population income. In January-September 2004, compared with the same period of 2003, they grew by 9,8% (In January-September 2003 by 14,1%). According to CB of the RF, with exception of the influence of seasonal and random factors, the real population income increased in September of this year (in comparison with previous month) by 0,9%. All that tend to growth of consumer demand of both population, and industrial enterprises.

We observe boosting of the demand for imported equipment on the part of Russian companies. According to the data of the Federal Customs Service (FCS), for the nines months of the year, import machinery and equipment was imported into Russia amounting to USD 19.9, which by 52,6% greater than in January-September of last year. Importation of consumer goods and raw materials is rising somewhat slower: In January-September 2004, the total volume of these goods into Russia increased by 31,5%.

Because of increase of imports, especially vulnerable are Russian enterprises, for example, automotive factories, which manufacture outdated products. They more and more stronger feel the consequences of ruble strengthening and improvement of competition. Since the middle of 2003, a steady decline of demand by population is observed for Russian cars. Following the results 9 months of this year, for the first time, the sales of foreign cars exceeded, in terms of value, those of Russian manufacturers. By estimate, this year the cost of foreign models bought by Russians made up USD 4.8 bn, and the cars produced by joint ventures almost USD 2 bn. The cost of purchased domestic cars amounted to USD 4.3 bn.

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