Prime Minister Vladimir Putin holds a meeting on Russian livestock farming in Tambov
Vladimir Putin's opening remarks:
Good afternoon, colleagues. Our meeting today is devoted to livestock farming, to the development of this branch which, without exaggeration, is one of the key areas in agriculture. A lot of things depend on its stability: domestic market saturation, the well-being of tens of thousands of people working in this industry. I would like to remind you that we discussed this issue about a year ago, just over a year ago, in Rostov-on-Don, as I recall. Importantly, even in those conditions, the difficult conditions of last year, we talked about positive trends in this industry. It is important that they are sustainable. It should be sufficient to point out that not only have we practically met the domestic demand for poultry (of which you are well aware), but we are even beginning to gain on foreign markets. Pig farming has also achieved very good indicators.
Incidentally, these are several of the leading producers of meat of all types: the Belgorod, Voronezh, Moscow, Leningrad, Rostov, Saratov and Chelyabinsk Regions, as well as the Stavropol Territory, the Republic of Tatarstan, the Republic of Bashkortostan, the Krasnodar Territory and the Altai Territory. In 2012, cattle and poultry production is expected to reach 11.6 million tonnes on the basis of live weight, which is 660,000 tonnes or 6% more than in 2011. Moreover, the year 2011 saw a 3.7% increase against 2010; in other words, we are maintaining a positive trend.
Of course, all this is thanks to the hard work and consistent efforts that above all, you and those working in livestock farming have made in recent years. Of course, this is the result of work as part of the national Agro-Industrial Complex development project: as well as special programmes on beef and dairy farming, poultry farming, pig farming, and development of the processing infrastructure.
In order to support producers, we are employing measures of customs and tariff regulation, and we are allocating considerable funds from the federal and regional budgets. As a result, we have managed to amass substantial investment and credit resources. The majority of this was spent on development projects, on the creation of new jobs, construction and modernisation of some 3,500 farms and other facilities using modern technology. Total investment in these projects between 2006 and 2011 amounted to 576 billion roubles. I would like to draw your attention to the fact that in this period, the federal budget interest rate subsidy totalled 120 billion roubles.
Meanwhile, despite state support, one branch of cattle farming requires further attention, as it remains problematic. This is beef farming and processing and dairy farming. I will cite some figures that are not exactly pleasant. Naturally, you have a general concept of the trends, but I do not know whether you are familiar with the summary of all these figures. In 1990, Russia produced 55.7 million tonnes of milk and in 2011, only 31.7 million tonnes, meaning Russia lost 24 million tonnes in twenty years. It's clear that this was caused by high imports in previous years, including in connection with the dumping of powdered milk. Naturally, this powder certainly undermined the economics of this branch.
Of course, it is necessary to take into account the extreme weather conditions of 2009 and 2010 and the subsequent shortage of feed. But in general, there are quite evident system-wide problems that we can and must discuss today. You know that from the federal budget we allocated additional funds, 5 billion roubles last year, to those farms that saved their livestock. These measures seem to be insufficient. I suggest that today we discuss investment barriers in this area and how to promote profitability for this production.
I’m sure we have every opportunity to saturate the market with domestic produce, in the same way as we did with poultry. It is impossible to resolve this problem with small, single measures. We need to take solid system-wide steps, improving the production infrastructure, and building efficient and mutually advantageous cooperation between meat suppliers and meat and milk processors. This is especially important for mid-sized and small farms. One of possible solutions to these issues could be the creation of a full production cycle facilities. We’ve done this before; it needs no promotion. We have enough successful examples of this format of work, primarily with poultry and pork processing.
But there are few dairy farms that operate like this. We should motivate farmers to launch new production lines to produce all sorts of dairy by-products in addition to milk. We should support such initiatives more actively. This, in turn, will make the dairy industry more attractive and will ensure the high quality of dairy products, thus making Russian commodities more competitive. It will also increase the percent of domestic dairy products on the market. This is now one of the key objectives for livestock farming development.
There is one issue that we will not overlook in our discussion – our accession to the World Trade Organisation. You know that your humble servant has always spoken about this, and I know your concerns about it. I want to say that accession to the WTO remains extremely important now, too.
I wish very much to discuss the following: We will finally join this organisation sometime this summer. Before then, we need to find solutions to the problems that may emerge following our accession. And we do have ways to protect our industries. We just need to think about it in advance, to come to an agreement. We understand all of this, and we are naturally ready to help. At the same time, I think you understand – we have been in talks for over seventeen years. In general our accession conditions are good. As for agrarian production, I can say without exaggeration, that these are the best conditions on which any country has ever joined the WTO. I will give you more details about this. Yes, there are risks, naturally. But given everything that the Russian economy and especially the Russian consumers have to gain, I think that the pluses prevail. Again, we will be discussing how to minimize all possible risks.
The government will continue to support domestic agriculture. In the course of this negotiating process for accession to the World Trade Organisation, we obtained a certain reserve for increasing direct support for commodity producers in the short-term. You know that we are planning total support in 2012 in the amount of about $5.6 billion, as far as I remember. Yes, $5.6 billion, or 170 billion roubles. Under our conditions for WTO accession, in 2012 and 2013 we can extend subsidies of up to $9 billion. You can see that that is twice what we planned. This is one of our negotiated reserves. And we will analyse the situation together in specific areas and will add more funds if needed.
I want to point out that we have maintained options for meat import quotas, as well as the right to adopt special antidumping import duties.
Next. WTO regulations do not restrict state subsidies for the development of transport or social infrastructure in rural areas, the creation of new businesses or subsidies for the education system and personnel training. And naturally we will continue these programmes. I think you will agree, I would ask Mr Zubkov, and the ministry to work together with you and look into the issues of transport infrastructure development. A considerable part of these expenses is used for the development of logistics. And if the government redirects part of its support in the form of direct subsidies to, say, the development of transport infrastructure and other logistics issues, it could be a considerable amount of economic support.
Next. WTO membership creates better conditions for attracting investment to this industry; this is an obvious fact. We will be able to attract investment primarily to processing, to the food industry, to gain a foothold for our products at foreign markets, to protect domestic producers from unfair competition inside Russia as well as abroad. It is clear that after the accession to the WTO, we should not relax; we should understand and consider the many subtleties of WTO membership. And I repeat: we have time to think about it, especially now that we are working on the government programme for agriculture development for 2013-2020, and we need to foresee, consider and take into account all the hidden risks.
In conclusion, I would like to say a few words on the planting season that will begin soon. We have repeatedly discussed this in the government, with the governors, and I know that farmers are constantly raising this issue. When we meet with them (including with you), they raise the issue of lubricant discounts for spring field work. I want to inform you that we have concluded negotiations with our oil producers. We have agreed that they will be offering discounts. It will amount to 30% of the price of lubricants as of December 2011, and the discount will be calculated on the wholesale price, not on the retail price, that is, a litre of petrol and a litre of diesel fuel will cost just over 16 roubles, which is almost half the current retail price.
In this regard, I would like to thank the leadership of our major oil companies. This is largely their good will, a social responsibility of the people working in this area. We understand how important it is for agriculture, that is, for the domestic food supply for Russian citizens. I would like to add that the discounted fuel supply will be increased by 10% from last year.
I hope this will be enough for all farmers. There is one more thing I’d like to say in this regard. Last year, farmers saved 18.5 billion roubles thanks to that discount (not including subsidies). This year they will save 12.2 billion roubles in the first six months alone. As for the second half of the year, that's a separate issue which we will discuss later. So, let’s get down to work. Please, Mr Zubkov (Viktor Zubkov, First Deputy Prime Minister).
By the way, when I was talking about the oil companies, even though they are not directly involved in agriculture, they are still willing to help out despite the fact that the fiscal burden on the industry exceeds 80%, including taxes, customs export duties and the like. In other words, they shoulder a heavy fiscal burden, and yet have shown a commendable sense of responsibility. I would like to express my gratitude to them once more.
Please, Mr Zubkov.
Viktor Zubkov: Thank you, Mr Putin. Ladies and gentlemen, I think this is good news not only for crop growers, who will already be starting spring farming operations in late February. This is also welcome news for livestock breeders, because cheaper grain and fodder are definitely important for developing our livestock industry.
Livestock breeding is the most important sector of the agriculture industry; in essence, it determines the level and pace of agricultural development. Livestock breeding accounts for a considerable amount of added value and also helps create new jobs, in particular in the food and processing industries.
It is important that the positive changes which Mr Putin spoke of can be seen in our shops. We see a wide range of quality homegrown foods. I've looked through the statistics for the past six years and can tell you that some years back Russian-produced foods accounted for less than 50% of the products sold in Moscow. Today that figure is more than 70%. These results have been achieved thanks to a considerable growth of investment activity in livestock breeding, encouraged mostly by the system of incentives and state support measures developed by the Russian government over the past few years. Furthermore, we are protecting the domestic market with the help of customs duties, which we will continue to use within the framework of the terms set out by Russia’s accession to the WTO. But I also agree with Mr Putin that we should once again thoroughly review all possible risks in all spheres of activity before July 1.
One of the fundamental instruments for boosting the development of livestock breeding has been the agriculture development programme, which the government introduced in 2008. As a result, we have greatly reduced our dependence on imported meat. We have increased meat production by over 3 million tonnes in the past six years. The largest increase has been reported in pig and poultry breeding, where stocks increased by 50% and 100%, and meat production grew accordingly. In 2011, annual poultry meat production increased by 320,000 tonnes, the highest increase ever recorded. Pork production increased by over 100,000 tonnes, despite two years of severe droughts. I have worked in agriculture for many years, and I think that even in the Soviet period two successive drought years would have meant a very trying time, with the type of achievements we reported in 2011 highly unlikely. So this is all the result of a market economy and the mechanisms which the government has put in place in recent years, as well as the welcome decision by the government on additional state support.
Gong back to the drought, we supplied as much grain from our intervention fund as the regions requested. Many regions later reduced their demands. Moreover, we provided grain not at the market price of 9 roubles per kilogram, but nearly 50% cheaper. As a result, farmers did not reduce production and food inflation was only 4.2% in 2011, the lowest figure for the last 20 years.
As a result, self-sufficiency in livestock breeding products reached 73%. Per capita meat consumption increased by 25%, but it is still too low at 58 kilograms. This is clearly not enough; we have sufficient capacity to increase this figure. For example, we can increase per capita poultry meat consumption from 25 to 30 kilograms in the near future and thereafter to 35 kilograms.
This is the average figure for Europe. We can achieve this goal through the expansion...
Vladimir Putin: First they eat so much meat and then they spend money on fighting obesity.
Viktor Zubkov: Not as much as in the United States. This is dietary meat, Mr Putin.
I’d like to speak about turkey breeding. Apart from farms in the Rostov Region, we will also launch high-tech projects in the Stavropol Territory, Kaluga and other cities. Given that the country’s Food Security Doctrine stipulates that homegrown foods should make up an 85% share of meat and meat products, we must keep up the positive momentum in the coming years. We are working to increase beef production, which is the most expensive and capital intensive segment, with the longest payback period in the industry.
Here are some examples. A project for beef production, the largest in Europe, is being implemented in the Bryansk Region with state assistance through Vnesheconombank – the bank’s chairman is attending this meeting. Mr Putin, I believe that we should visit that project and take a tour around Miratorg’s premises. I can assure you that it is the only facility of its kind in Russia. It is an ambitious, large, super-modern project, which, I think, has no analogues anywhere, in Europe or... It will produce 40,000 tonnes of beef and is graphic proof that Russia really can have a new look, in other words, we are giving the industry a boost from the ground up, through cutting-edge design solutions.
You have already spoken about the chief risks Russia will face after its accession to the WTO. They relate primarily to poultry and pig breeding, and also, to an extent, to beef production. Considering the high investment component in the cost of livestock breeding in Russia, our farmers are not yet ready to compete on the open market without support.
Take pig breeding, where only one third of farms are running efficient, high-tech facilities, 15% have moderate efficiency and nearly half of pig farms are, unfortunately, in the risk zone. If we open the door to pork products from abroad, it is these at-risk farms that will sustain losses and who will need our help. We have approved the annual allocation of 6 billion roubles for pig breeding in 2012-2014, but we should still search for methods to protect our industry. We have invested over 200 billion roubles in pig breeding in recent years and we are planning to allocate even more, up to 300 billion roubles, in the near future. The government regularly discusses the potential risks to these investments and ways to minimise these risks.
Poultry meat: Compared to pork and beef, poultry meat is becoming economically more attractive in terms of production and consumption, as well as for processing. This is a global trend. We have set ourselves the task of expanding our poultry markets.
One way this goal can be achieved is to provide targeted assistance to the suppliers of homegrown poultry meat for the production of baby foods and to social institutions. Mr Putin, it might be fortunate that we have not yet saturated the market with Russian poultry meat: so we should not only increase production but increase consumption as well. We should review consumption levels in schools, kindergartens and social institutions such as hospitals, particularly taking into account the WTO rules on Green Box subsidies.
We need to review, and most likely increase consumption levels, which means that we will be able to directly supply poultry meat and possibly beef to these facilities. Ways of doing this could be specified during the drafting of the law on the federal contract system. We should consider the issue from the viewpoint of supporting domestic producers, to prevent imports being supplied to these facilities. How could we do this? I think that our ministries and agencies should be instructed not only to increase consumption levels at these social organisations, but also to ensure that they receive homegrown foods instead of imported ones. To protect the market of high-quality beef under WTO conditions, the Agriculture Ministry should rapidly develop legislation on national standards for this type of meat. Until we adopt such standards, imports registered as high-quality beef could in fact be of low quality. I think that elaborating national standards is what we should do without delay.
In general, to be able to protect Russian producers after joining the WTO, we need to formulate a new system of federal and regional incentives for livestock breeding. Our efforts in this area should be focused on stimulating interregional cooperation and on ensuring that we meet domestic demand with domestically produced meat. You have already listed the regions which are self-sufficient in meeting their meat demands and even have surplus products to supply other regions. I will not name these regions because you have already done so. In other regions production often lags far behind consumption. There are regions which produce very little meat, barely 20,000 tonnes. Since they are large regions, they have to import meat from other regions or from abroad. And we know that high transport costs, in particular by rail, have a knock-on effect in increasing the retail price of meat, which is why we need to work closely and systematically with those regions where meat production is low or insufficient.
Each region should formulate a clear programme to meet its local needs for domestically produced foods. We have issued an instruction that this work must be completed by July 1. There is also a proposal, which we could discuss today, to withhold state support (subsidies from the federal and regional budgets, reduced fees and other incentives) from food enterprises that use imported raw materials. If cheaper products swamp our markets and reach the meat-processing facilities, we will retain the right to… After all, we don’t subsidise foreign-made equipment, we only subsidise domestic manufacturing. We took this decision, and it was absolutely correct. Other measures being considered for supporting our producers include further development of our educational services, stimulation of cooperation between small farms and enhanced standards of veterinary protection of the domestic market. This is especially important considering the need to prevent the import of sub-standard goods into the country. Customs and veterinary supervision on the border should be even stricter. Measures should be taken promptly, with the ultimate aim of maintaining the standards of domestic livestock breeding.
The new state programme, which will come into effect on January 1, 2013, not only strengthens the focus on the basic development directions in livestock breeding, but I believe that its implementation will lower the risks for Russian livestock breeding that have resulted from our accession to the WTO. I would like to once again express my gratitude for extending the fuel discount period, which is very important. I believe that this will be welcome news to the farmers. Thank you.
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Closing words by Vladimir Putin
A sensitive issue that, one way or another, was repeatedly mentioned today was the WTO. You know that, unfortunately, with the type of administration we have, it means, to put it bluntly, we have not had very efficient protection tools up to now. Take dairy production, it's gone down. Why? Because we imported dried milk. Why? Because there are enormous loopholes in the border with Belarus, in other places…
They imported buffalo meat pretending it was beef, they imported South-East Asian meat saying it came from Europe and so on. To be honest, our administration, including the customs administration, is of a very poor standard. In today's world we have lots of these loopholes.
I very much hope that our accession to the WTO will help us resolve many things in a more modern and civilised way, no matter how strange it may seem. We only have to recognise the threats and resolve them in good time, we can do this together.I want to thank you for the results of last year’s work and I hope that this industry will develop intensively. I can ensure you of our continued support. Thank you.