Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, colleagues. We are entering a very important and weighty period for our agriculture. I suggest that during this meeting we discuss it in detail and analyse the readiness of our regions, our agricultural producers and enterprises for spring field work.

We traditionally devote a great deal of attention to this subject – I’d call it special attention – and right so. I won’t recall the Russian proverbs that we all know well, but the entire year depends on how we fare in this period and what results we achieve.

I have just met with heads and experts of farms in the Voronezh Region. I think that some of them are present here. During our conversation we discussed, as usual, supplies of fuel and lubricants and equipment, prospects for the future harvest and prices, the energy industry and electricity generation. The main point I want to make is that they are feeling positive.

I have just shared my impressions of this conversation with Mr Zubkov. The questions were specific and far from easy. They are important for the industry in general, but they were in a very good, I’d say, combative mood. A business-like attitude and a combative mood – that’s the main thing.

This winter is protracted. The governor has just said that spring has been delayed already by three weeks. Is this right? I think the same is true of the rest of the country. The delay is between two or three weeks. This means that sowing must be carried out under a tight schedule and with the utmost concentration of agricultural equipment, fuel and lubricants, seeds and fertilizer, all the more so since cropland will increase a bit this year.

According to expert estimates, winter crops are in normal condition. This is a good foundation for the future harvest. Now we should effectively conduct the spring sowing campaign and prepare properly for harvesting grain. Ms Skrynnik, perhaps it’s too early for us to discuss harvest prospects? I’m aware of the tentative figures. As you may recall, last year we had 94 million metric tons, which is a very good result. This year’s harvest is anticipated to be about the same.

World grain prices are high, and we expect this to improve the bottom line of our agricultural producers. We have already exported about 21.5 million metric tons. The overall export capacity for 2012 stands at about 25-27 million tons, and grain deliveries continue. As I mentioned just now, prices look good at $280-$285 per metric ton for FOB Novorossiysk. That’s 2,000 roubles more than they pay for one ton of grain at elevators in the Central Federal District and 3,000 roubles more than the going rate at Siberian elevators.

With respect to the main resources needed for the spring sowing campaign, I’m aware that our agricultural producers have been supplied with seeds in full. If regional heads present in the audience know otherwise, let’s discuss it here today.

With the help of the state, Russia is gradually restoring the production of its own high-quality seed and planting materials and reducing its dependence on imports.

Next. As before, the state will reimburse a portion of the cost of chemicals. This year, the amount of reimbursements will be lower than in previous years, but it’s still tangible at 5 billion roubles. The government has approved subsidy distributions across the regions, and the funds have started flowing into the regions, haven’t they, Ms Skrynnik?

Yelena Skrynnik: Yes, they have.

Vladimir Putin: Good. Please don’t be shy and let us know if there are any problems.

The price for mineral fertilisers is also an important issue. I hope that the agreement that you’ve signed earlier has been renewed. Please keep track of it and respond in a timely way to any changes. Prices will grow anywhere from 6.9 percent to 11.5 percent during the second half of 2012, no more. I would like all the departments concerned to keep track of this as well.

The prices and timely delivery of fuels and lubricants is another very sensitive matter. As before, agricultural producers will buy fuel at reduced prices. This support measure has a very good track record. Of course, it benefits greatly our agricultural producers. I would like to thank again our leading oil companies. We agreed that wholesale fuel and lubricants prices established in each particular region on December 31, 2011, will be discounted by another 30 percent. That’s 30 percent off the wholesale price! The supplies of discounted fuel will be increased by 15 percent as compared with 2011, which will help agricultural producers save as much as 11 billion roubles during the first six months of 2012 alone. I would like the Ministry of Energy and the Ministry of Agriculture to make proper arrangements so that discounted fuel and lubricants become available on time not only in the regions, but at each particular farm as well.

When I spoke with heads of agricultural enterprises recently, some of them told me that fuel was already coming in, which is comforting to know. I’m not sure, though, that it’s happening across the country; therefore, you need to follow it closely and, together with oil companies, make sure that we are getting the results that we want. Of course, you need to keep in touch with the Federal Antimonopoly Service and monitor prices for fuel and lubricants in order to preclude any possibility of an increase in prices.

With regard to the technical condition of agricultural equipment, over 80 percent of it is ready for the spring sowing campaign, which is what we had last year. In 2011 alone, farms acquired about 30,000 new grain and forage harvesters, tractors, and other agricultural equipment. The government decision to sell such equipment at a 50% discount has certainly played a definitive role here, and farms could acquire an additional 5,000 pieces of equipment. Of course, we will promote retrofitting of the agro-industrial complex.  To this end, we allocated an additional 3.5 billion roubles to the Russian Agricultural Leasing Company in late 2011. As Mr Nazarov (Valery Nazarov, general director of Rosagroleasing) reported earlier, the company will provide the bulk of financing this year, so the total will be about 9 billion roubles.  Is that correct, Mr Nazarov? That’s a substantial amount, and I hope it will significantly improve agricultural production in Russia.  

Leading national banks, such as Sberbank and Rosselkhozbank, have issued a combined loan of 23.8 billion roubles for the sowing campaign, which roughly corresponds to the amount of loans provided in 2011 today, 24 billion. From what I know from my conversations with them, agricultural producers are concerned about Sberbank’s assessment of their collateral values. They don’t have such concerns regarding Rosselkhozbank, though. The market value of the collateral is being downplayed; at least that’s what I heard today. We need to look into that and sort the matter out with Sberbank. Mr Patrushev (Dmitry Patrushev, chairman of Rosselkhozbank’s board), was it your deputy or head of a regional branch of your bank who just told us that your loans have an APR of 9.9%?

Dmitry Patrushev: Mr Putin, this rate applied to retail loans. Yes, we provide loans at  9.9% APR. But that rate applied only to retail borrowers.

Vladimir Putin: What about agricultural producers?

Dmitry Patrushev: Our rate is 10.75% APR for the sowing campaign.

Vladimir Putin: An acceptable rate compared to other lending institutions. It’s even below the national average.

In closing, I would like to say that 170 billion roubles will be allocated from the federal budget to support the agro-industrial complex in 2012. A portion of this amount – 136 billion – will be used to carry out the state programme for promoting agriculture in Russia. Our goal is to use these funds with maximum effectiveness, have our agricultural producers strengthen their positions and make the agricultural industry one of Russia’s leading economic drivers. This matter is particularly important in light of Russia’s pending accession to the WTO. We have discussed this subject on many occasions, you were part of the negotiation process, and you know what I’m referring to. The government will provide $9 billion in direct aid in the near future, but this amount will taper off over time. However, I would like to reiterate that this applies only to direct subsidies for agricultural producers. These amounts have nothing to do with infrastructure, social issues, transport, communications, roads or anything of the kind. However, we all realise that all of this affects levels of agricultural output in a major way. Therefore, the federal and regional governments should keep this in mind and withhold from cutting overall amounts, because these amounts are scheduled to be reduced to $4.5 billion by 2018. By the way, we allocated $4.5 billion this year. We projected $9 billion under the WTO arrangements, but we will actually release only $4.5 billion. In other words, there are no cuts in funding, not even under the arrangements of our accession to the WTO. These additional funds can be used for infrastructure and social development, or other projects that benefit the agricultural industry. We will need to give it some thought together some time in the future.

I was just reminiscing with the governor of this region – he used to be a minister of agriculture – about how it all began. The total support provided to agriculture back then stood at $350 million, to use dollars. This year it’s up at $4.5 billion. Obviously, a substantial difference in figures. Most importantly – and this is what pleases me most –  these funds are being used effectively and we have much to show for them. Russian agriculture is showing very good numbers and prospects of further growth.

Let’s discuss today’s topic: the sowing campaign. Mr Zubkov, please go ahead.

Viktor Zubkov: Mr Putin, colleagues, in his today’s statement Mr Putin touched on many concerns facing rural dwellers. Traditionally, prior to the sowing campaign, Mr Putin invites actual agricultural producers to discuss current issues, and then we meet with regional heads. For your information, I have been working in the sphere of agriculture for many years now, and I know how things are in this industry. I can see people changing right before my eyes. Today, all agricultural producers, be they crop or cattle producers, are highly qualified professionals. Mr Romanenko (Gennady Romanenko, president of the Russian Academy of Agricultural Sciences), please don’t take it personally, but people in many regions compare the work performed by actual agricultural producers to the work done by the Russian Academy of Agricultural Sciences.

Vladimir Putin: Excuse me for interrupting you, Mr Zubkov, but I want to get back to my recent conversation with heads of agricultural farms, when one of them, a cattle breeder, told me that 30% of his employees had higher education degrees. You won’t find many industrial enterprises where 30 percent of the staff is college-educated. I believe this is an indication of some qualitative changes taking place in the agricultural industry.

Viktor Zubkov: I would like to get back to the Agricultural Academy. Mr Romanenko, you either need to catch up with the standards established by the best farms in Russia, or we will have to transfer the title to the lands currently held by the academy to the regions, so that they can start looking for investors and put this land to good use. I wanted to make you aware of this in the presence of Mr Putin.

Today, we should use this representative forum to discuss the provision of agricultural producers with seeds, mineral fertilisers, fuel, equipment and financial resources. We are discussing these issues in the government with businesses on an ongoing basis. We saw at our last meeting that we had resolved major problems across Russia. But making sure every single agricultural producer in each region gets the things we will be talking about today is a skill that, I think, every governor must polish in their area.

What are the priorities for this year? One of them is to keep the current growth rate for the farm produce volumes and ensure sufficient grain supply to the domestic market – first of all in order to promote livestock breeding development and, second, to increase our export potential.

Despite harsh winters, Russian weather services report that 94% of winter crops are in good or satisfactory condition, which is a little higher than the average percentage  in many years. We have around 51 million hectares for spring sowing campaign, which is 300,000 hectares more than in 2011 and 4 million hectares more than in 2010.

Vladimir Putin: What is the area required for winter crops? It is around 1 million hectares, isn’t it?

Yelena Skynnik: 16.7 million.

Vladimir Putin: 16.7 million?

Viktor Zubkov: That’s right, 16.7 million hectares. If we add winter crops here, the total area will make 78.3 million hectares. This is a great deal. We can see that spring is about two weeks late this year. Considering that the area under grain crops will be extended by nearly two million hectares, it will be difficult to tackle such an amount in the short period of time that we have, which means it requires certain skills to arrange the work properly.

It should be noted that, as Mr Putin said, the weather causes us some concern, which means the sowing campaign must be organised really well. The profits and financial stability of every particular agricultural producer – as well as the long-term livestock breeding development, which is our top priority, and retail prices – will depend on the results of the spring sowing campaign. What was done last year (and I think it is equally important) was largely due to your efforts as heads of regions. The food price inflation was the lowest in the past 20 years at 4.1%. This was the rate for 2011. As of early 2012, the situation is even better than it was last year. We checked the figures recently. The inflation rate is very small for the past three months. It is crucial to complete the spring sowing and harvesting successfully in order to hold the line on food prices.

I should note here that 46 billion roubles have already been allotted from the federal budget for crop production. This is a significant amount. The banks partly owned by the state confirmed they are ready to provide loans for seasonal work as quickly as possible. Rosselkhozbank plans to provide 64 billion roubles while Sberbank will issue 46 billion roubles. Only several years ago, 20-billion-rouble loans were considered quite generous. Now we got 110 billion roubles for the first six months of the year alone.

This year the spring sowing campaign will be subject to a new system of farming insurance. The law on agricultural insurance came into force on January 1. We have adopted the required regulatory documents and we are currently working on the independent appraisal of damage. Six billion roubles have already been allotted to support farming insurance. A new mechanism will be employed for direct subsidy payments to insurance companies.

I’m asking the heads of regions to closely monitor these issues. They are vitally important and we have an opportunity to do this work differently this year. We believe farmers will not have to tie their funds to pay the subsidised half of the insurance premium and wait for a refund for months.

Generally speaking, I should say that the preparations for the spring sowing campaign are going well. We believe it is highly probable that this year we can increase grain exports to 26-27 million tonnes, which is twice as much as in 2005 and 2006. In 2005-2006 we exported 12 million tonnes, and now we’re looking at 26-27 million tonnes. If we can handle this amount I think it is realistic to expect that we will be the second largest wheat exporter after the United States.

I think it is very important for us to make sure more farmland is used for agricultural production. The law on the use of farmland was adopted last year and it has already come into effect. We should use the full potential of this law. A new scheme for subsidising construction and upgrading grain elevators was introduced in 2010. You raised this issue every year. We have successfully resolved this problem. In late 2011, we had our first experience of state procurement interventions with a buyback option. We only purchased 420,000 tonnes, but it is just the beginning. People trust this scheme and I think that this practice could be used more widely in the future.

We need to analyse the structure of grain and meat production and consumption in every region and work harder on developing livestock breeding. Every so often, we hear complaints how hard it is to transport grain from Siberia, the Krasnoyarsk Territory and other regions via Central Russia to the Black Sea for export. Of course, this problem is massive and the amount to be transported is huge. The infrastructure in Russia’s Far East is, unfortunately, still underdeveloped. The distance is another aspect. I suggest producing more livestock products and using grain for direct consumption, which will help us circumspect the issue of transporting products to that area. We should give this option careful consideration. I think that the new state programme, which we are going to implement starting in 2013, must focus particularly on Siberia and the Far East.

Additionally, from January 1, 2013, it is necessary to develop a long-term approach to concessionary terms for cargo operations on the essential routes as part of the Customs Union agreements and a common railway operation rate policy. We do it every year and it helps the regions but we must consider a long-term solution for these two issues.

I am not going to speak about the WTO as Mr Putin has already outlined what needs to be done by the government in these circumstances. We have until July 1. If you have any particular suggestions, please speak out.

I hope that today’s discussion of the important aspects of the sowing campaign and the government instructions that must be issued in this respect – and we have already drafted such instructions, Mr Putin – will motivate you to move forward in implementing the national food programme.

Thank you.

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Vladimir Putin’s comments on Mordovian head Nikolai Merkushkin’s report

Mr Merkushkin, the European Union is doing many things  better – in a competent, innovative and efficient way. But if they had done everything correctly, their debt-to-GDP ratio today would not be 90% on average, and they would not be having so many problems in some of their industries. We cannot and should not mindlessly copy everything they do. This was just a preamble.

Next, where it is profitable to grow potatoes or sugar beet, we should grow these agricultural plants. And there is no need to plant bananas if their production is unprofitable. It may difficult to give up some traditional crops but the industry should be focused on effective and promising areas of development. Supporting unprofitable sectors will ultimately lead to highly negative results, because if we continue to… For example, the results for Krasnodar, Stavropol and the Volga area can be levelled off with federal budgetary allocations, but this amounts to subsidising unprofitable sectors. We should be honest with the people and draft a programme to ensure effective development of some sectors, including in agriculture.

Mr Kozhemyako (Oleg Kozhemyako, Governor of the Amur Region) has said that they produce 4,500 litres of milk per cow. This is good, but their climate is not any worse than in the Leningrad Region, where they produce about 7,500-8,000 litres. So the Amur Region is far behind the Leningrad Region, but they are working towards the right objective, because livestock breeding is… They have good fodder resources in the Amur Region because they grow animal feed and enough soybeans. The region’s livestock breeding programme will become increasingly effective, especially if they increase milk production. And then they will not only produce milk but also make cheese, which is a complicated business with its own issues, but these will be higher-added value products. We should think about it. We will discuss this matter later. Maybe some regions need special programmes. Mr Merkushkin may be right in that we should consider issues, in this case agricultural ones, from the regional viewpoint in order to correctly structure our efforts to support promising businesses which will be profitable and economically expedient.

As for loan resources and refinancing of some companies in the Volga area due to frequent droughts, we should certainly consider drafting a separate programme. We may also think about supporting the area with federal funds, but in such a way as not to create problems for our financial institutions. We must find a way. Mr Zubkov (Viktor Zubkov,First Deputy Prime Minister), please remember this when you hold a meeting in April.

As for social issues and the salaries of rural professional class in neighbouring regions, you are right in that we need to address this.