18 march 2011

Prime Minister Vladimir Putin hosts a teleconference on preparations for spring sowing

Vladimir Putin

At a teleconference on preparations for spring sowing

“This year we need to compensate as much as possible for the losses of the two previous lean years, create a stable grain balance and build up reserves. Moreover, grain is a basic resource for the development of cattle breeding and other areas of agriculture.”

Opening speech by Vladimir Putin:

Good afternoon, colleagues. Let us begin.

Over the coming weeks spring farm work will be in full swing in the south of Russia and in other regions of the country. And we must face some major challenges. My suggestion for today's expanded meeting, involving federal authorities, regional governors, industrial trade unions and associations, as well as leading banks supporting agribusiness, is to make a careful analysis of the state of affairs in agriculture and look at the regions' readiness for spring sowing and other work crucial for the future harvest and, therefore, the stability of the domestic food market and the general development of Russian agriculture.

To begin with I must say that this year we need to compensate as much as possible for the losses of the two previous lean years, create a stable grain balance and build up reserves. Moreover, grain is a basic resource for the development of cattle breeding and other areas of agriculture. Last year's drought resulted in the loss of crops on more than 13 million hectares of land. According to the Federal Statistics Service, in 2010 at all kinds of farms the gross grain and legumes yield was 60.9 million tonnes (62.7% of the 2009 harvest).

On top of that, because of the harsh weather we did not sow as many winter crops, approximately 20% less. In absolute terms this means a decrease of 3.5 million hectares, and if the forecast about inevitable winter losses comes true this figure may grow to 5 million hectares. It means that we have to sow a lot more spring crops and take advantage of all the opportunities and resources we have for it. In brief, we need to create conditions that would allow agricultural producers to sow as much as possible this spring.

However, and I want to point this out now, we don't need massive production just for the sake of massive production, as the Soviet saying goes. It is necessary to sow quality seeds and strictly follow all the required procedures. The sown areas must be expanded not mechanically, by any means, but in favour of the crops critical for the grain balance. And agricultural producers, of course, should be confident in the government support both on the federal and regional levels. They should be sure that they will be able not only to grow, but to harvest the crops and, of course, sell them at an attractive and economically reasonable price. In this context, I want to remind you that under federal laws the Ministry of Agriculture must publish each March the minimum level for grain prices for the next harvest, which should involve the state regulation of the market.

I want to hear from the Ministry of Agriculture about whether such a threshold has been determined and how it was determined. It is important for agricultural producers to be able to draw up their plans for finances and production. I want to repeat that it is a matter of principle to provide government support to all the farms that need it – from major agricultural holding companies to small and medium-sized agricultural businesses.

As you know, we have maintained the discount on fuels and lubricants. Last year this measure allowed agricultural producers to save and put aside 5.5 billion roubles for development purposes. The thing is that thanks to the same measure this year agricultural producers may be able to save 10 billion roubles, which could be used for development.

Meanwhile, agricultural producers continue to bring us information about rising prices on diesel fuel. I would ask the regional governors to tell me today about the local situations in this field.

One more thing: It is important to have the benefits in terms of fuel and lubricants work for those who till the soil, rather than for those who profiteer and employ all kind of machinations. Such instances impair the mechanism of preferential prices and they should be dealt with seriously and quickly. Furthermore, you should know that we have allocated an additional 2 billion roubles to buy seeds and mineral fertilisers. In total, the federal subsidies for the purchase of mineral fertilisers amount to 5.5 billion roubles.

By the way, recently we talked a great deal about another measure: encouraging the farms that maintain their stock of cattle. We promised 5 billion for this purpose. Today I have signed the relevant directive to allocate the money. It is here on the table.

Let's talk about mineral fertilisers today in greater detail. According to the information from the regions, agricultural producers have bought less fertiliser than last year.

Please note that the efficiency of the measures proposed should be higher. We earmark substantial funds for the purchase of fertilisers and we must make the funds go to the benefit of agricultural workers, not for the compensation of transport companies' costs and increased profit margins for the middlemen.

This year we will provide more than 150 billion roubles from the federal budget to the domestic agriculture industry, including about 125 billion directly for its development programme. The entire system of transferring funds to the beneficiaries of state support shall function like clockwork. It must happen automatically, which is the responsibility of federal and regional authorities. Any malfunction is inadmissible, especially at such a time. You understand this very well. It is unusual for government executives to be personally involved in pushing the money through to some companies, as was, unfortunately, sometimes the case last year. Just recall how we were dealing with the funds for the farmers affected by the drought.

Likewise, there should be no failures in the provision of bank loans. According to our estimates, agribusinesses' funding needs for spring farm work amount to over 250 billion roubles, including about 150 billion in loans.

As we have agreed, Rosselkhozbank must provide no less than 100 billion roubles for spring farm work and Sberbank – no less than 50 billion. I would like bank representatives to report on their readiness to implement the programme.

Colleagues, as a separate item I want to speak about the decisions taken this March in Tambov at the congress of the Association of Private Farmers and Agricultural Cooperatives. First, the equipment kept in Rosagroleasing depots will be provided to agricultural producers at a 50% discount at the expense of the federal budget. About 4 billion roubles have been allocated for this. The relevant executive order will be prepared by the government – Mr Zubkov (turning to Viktor Zubkov), please, get the work done – and signed today.

In the beginning of 2011 Rosagroleasing had more than 5,700 units of agricultural machinery, including 2,705 tractors, 1,208 motor vehicles, 1,328 agricultural machines and equipment.

I'd like to ask Rosagroleasing General Director Valery Nazarov to prepare a schedule for machinery and equipment sales and report to the government on a regular basis about keeping to the schedule. Most important is to have the new equipment start working in the fields as soon as possible.

Additionally, based on requests from farms we have lifted restrictions on Rosselkhozbank financing for the purchase of foreign-made machinery. However, in such cases interest payments will not be subsidised. We must first of all encourage the purchase of machinery and equipment manufactured in Russia.

In this regard, I believe we need to take greater advantage of the positive experiences we had in implementing our plans for the auto industry and create every condition to encourage manufacturers of agricultural machinery, including international companies, to develop production in our country.

The next item on our agenda, which we also touched on at the meeting in Tambov, is assisting farmers and agricultural enterprises with registering land ownership rights and providing funds from the federal and regional budgets for this purpose. I would like the Ministry of Agriculture to tell us today when we will be able to launch this programme. I believe we should do it this year, without delay, over the next few months… I understand that there are certain complications involved with funding, but still I would like to hear your proposals.

I’d also like to raise a few more issues that are of critical importance to our agriculture and related industries. As you know, we have used our reserves to stabilise the grain market. The prices are going down, maybe not very quickly, but still, they are stable. On the whole, compared with international prices, domestic prices are… how much?

Remark: Between 30% and 40%.

Vladimir Putin: Yes, grain costs 30-40% less in our country than on international markets. The price is 30% or even 40% lower!

When making the decision on grain intervention, we were guided by the interests of each member of the production chain in the agricultural sector – from grain producers to the main consumers… We did our best to keep prices stable, and to keep milk, meat and other products affordable.

However, we have to admit that production costs have increased somewhat for cattle breeders. Also, it is unclear what will happen with fuel and energy prices. As you remember, we committed ourselves to keeping their growth under 15%. I understand that it’s the national average and that the situation may vary from region to region. Many regions are living up to this target. At the same time, in some regions growth rates have exceeded 15% considerably.

I am asking the Ministry of Energy, the Federal Antimonopoly Service and the Federal Tariff Service to sort out this situation immediately and keep to the target set by the government decisions in the future. We cannot allow irresponsible energy companies to undermine our plans for agriculture or any other industry.

I’d like to remind you that there are far-reaching plans for replacing imports with domestic goods and for increasing poultry and pork production. We have already reduced import quotas for poultry by half in order to bolster domestic production and fill the market with Russian quality and low-priced products. And we cannot allow these plans to fail. To this end, we need to provide cattle farms with fodder and straighten out the problems with energy prices. In addition to this, admittedly, we will need to provide direct support to enterprises. We are reviewing the possibility of allocating extra funds from the federal budget – about 12.5 billion roubles – to back up poultry and pork producers. We are doing this to maintain the positive dynamics in the development of cattle breeding, promote Russian products on the domestic market and keep prices affordable.

In closing, I’d like each of you to be prepared to work hard over the next few months and be aware of your responsibility for the future of the industry.

Clearly, the only thing we cannot control is weather. The rest depends on us… And still, we need to be prepared for any weather contingencies. The effective implementation of all our plans cannot help but improve the situation in agriculture. And it will doubtless improve.

I would like to give the floor to First Deputy Prime Minister Viktor Zubkov now.

Viktor Zubkov: Thank you. Mr Putin, colleagues.

Mr Putin, you correctly pointed out that the past two years of drought would have a lasting effect on the development of agriculture in Russia. Regional governors must give special attention to spring sowing this year, given the difficulties facing farms. All the government agencies represented here must certainly ensure that this work is well-coordinated.

Spring sowing will be about 8-10 days late this year due to the excessive amount of snow. A popular saying goes, “a lot of snow gives a lot of bread.” But this will only be true if we put in hard work this spring. Naturally, the results of this spring’s sowing, along with this year’s winter crops will determine the domestic supply of grain and fodder for the next few years. We need to use the land where winter crops were not sown last year – nearly 3.3 million hectares. About 10% of winter crops will probably die as is often the case, usually 8% to 10%. This means we will have to sow additional spring crops on 4.5 million hectares. The Agriculture Ministry estimates that the total spring crop area will exceed 50 million hectares.

Considering the magnitude of this challenge, the government is working in close contact with regional governors. We have held several on-site meetings with regional governors since February. We discussed these issues at district councils headed by presidential envoys in the Southern and Central Federal Districts. I am planning to meet with regional governors in all the federal districts before it is time to start sowing this year.

We are focusing on maintaining a balance in the production of grain, fodder, sugar beets, potatoes and vegetables in the regions. This year’s potential grain harvest is currently estimated at 84-85 million tonnes, and 35 million tonnes for sugar beets. At the same time, we would like the regions and the ministry to take into account the need to plant more crops of which there was a shortfall last year while planning this spring’s sowing. We know what they are – buckwheat, potatoes and barley. The shortage of these crops accelerated inflation last year. Therefore, we need to compensate for that shortage, which is not difficult at all, and maintain the stability of domestic prices.

This spring’s sowing on the planned areas will certainly require substantial financial and material investment including seeds, equipment, fuels and lubricants, mineral fertilisers and loans.

I have regularly reported to you, Mr Putin, that the government is constantly monitoring this effort. Take seeds, for instance: there is a shortage of 150,000 tonnes at the moment. So we decided to tap the grain intervention fund to compensate for this shortage. The Agriculture Ministry has been instructed to draft a relevant resolution and make sure that the required amounts reach the regions that need them.

With fertilisers, there is an agreement between the Association of Fertiliser Producers and the Union of Agricultural Producers limiting price hikes to 12.8%. This agreement has been in effect for several years; this level will be maintained over the first six months of this year. Yet, retail prices are often raised considerably in some of the regions, which you’ve just mentioned. The agribusinesses that bought fertilisers in the autumn and in December 2010, bought them cheap; those buying today will inevitably incur additional costs. However, we have asked the antimonopoly service to monitor fertiliser prices to prevent more price hikes.

With fuels and lubricants, there is a government resolution on a 10% discount. Oil companies have signed agreements on discounted supplies with 35 regions. I have discussed this with many governors. They confirmed that they have indeed been granted a discount of 8-9 roubles per litre. This discount seriously helps agribusinesses, adding up to around 10 billion roubles across the country.

What is worrying me now? Some of the regions have not yet signed such agreements with oil companies. I just looked through the latest data. For instance, the Krasnodar Territory is starting intensive grain sowing and sugar beet sowing in a few days, and they have so far failed to sign this kind of agreement. The same holds true for the Stavropol Territory. I am concerned that Russia’s southernmost regions are lagging behind in this respect. Their governors need to take a closer look at this and find out what the problem is.

* * *

Mr Putin’s closing remarks:

“You are all perfectly aware of how difficult this situation has been for us in the past two years. So the work we’re beginning today is paramount to us personally and to the nation as a whole.

We will end up with some barely sufficient carryover for the next year unless we get (this year’s) planting and harvesting campaigns right. This is exactly the purpose of today’s broad attendance here – to consider this situation in all its seriousness. I’m sure that if we make a concerted effort to do this effectively – and we can work like that – then we’ll obtain a good or a very good result. We’ve got all it takes. And then again, good results are possible to achieve even in harsh climatic conditions. I hope we succeed.

“Secondly, I’m asking you all to take the spring planting, which is just beginning, with all due seriousness and responsibility. Every detail matters, no matter how small.

“I’d also like to stress that this broad-based forum will not be the last one of its kind, considering how badly we need a good result in 2011. We shouldn’t let the drought continue to cause losses for us for a third consecutive year.”