Russian, Ukrainian and Kazakh agriculture has a big part to play in stabilising world food markets, the United Nations Food and Agriculture Organisation (FAO) will tell financiers in Kiev this weekend.
“The former Soviet Union is probably one of the few places in the world where we can bring 10-15 million hectares of land into use without chopping down rain forests or using up savannah”, Charles Riemenschneider, director of the FAO investment centre, told Emerging Markets.
The FAO believes that CIS wheat and coarse grain production could reach 230 million tonnes, 80% up on the present level, by 2016 – if constraints on planting area and yields were removed. That projection assumes that 13 million of the CIS’s 23 million hectares of abandoned land would be returned to production.
“There are bottlenecks in storage, processing and transportation”, Riemenschneider said. “Private investors may be able to come in and solve some of these problems, given that we are probably in for a period of relatively high agricultural prices.
“There is great potential. Ukraine’s winter wheat production is up 13% this year. It’s quite possible that Russia will produce 85-90 million tonnes in the 2008-09 season.”
The FAO says government action is vital to raise grain output levels – in particular land market reforms, and support for storage and transport infrastructure development. Russia has allowed the sale of farmland since 2006, but in Ukraine there is a moratorium and grey schemes such as long-term leases are used.
Proposals to develop agricultural production were discussed between government, business, and FAO and EBRD officials at a conference in London in March. Riemenschneider will repeat the message at a seminar in Kiev on Sunday, and at a special conference of agriculture officials and agribusiness executives on Tuesday.
To address the danger of world food shortages, highlighted dramatically by this year’s price spike, long-term measures to raise yields are vital, Riemenschneider said. “If land markets are not functioning properly, farmers will not invest.
“Using potash and phosphates to improve land quality is a long-term activity. Change will not come overnight.”
Riemenschneider added that this year’s agricultural crisis is partly a function of development institutions’ shift away from long-term agriculture development issues in the last two decades. “We are paying the price for a lack of investment. After the ‘green revolution’ [in Africa and Asia in the 1970s and 1980s] people became complacent. Resources were shifted into health and education, which is vital, but it was done at the expense of agriculture, which was a mistake.”
The FAO has also sounded warnings about the development impact of the powerful agri-holding companies that now dominate CIS agriculture, controlling an estimated 40-50% of grain production in Russia and 80% in Kazakhstan.
“There are trade offs between economic efficiency on one hand, and social and environmental issues on the other”, Riemenschneider said. Agri-holdings will put independent and family farms out of business, aggravating unemployment in rural areas, an FAO document warns.
The FAO-OECD Agricultural Outlook published last year projected CIS wheat and coarse grain production at 159 million tonnes in 2016, 7% higher than 2007.
Riemenschneider added that this year’s agricultural crisis is partly a function of development institutions’ shift away from long-term agriculture development issues in the last two decades. “We are paying the price for a lack of investment. After the ‘green revolution’ [in Africa and Asia in the 1970s and 1980s] people became complacent. Resources were shifted into health and education, which is vital, but it was done at the expense of agriculture, which was a mistake.”