Dzhambulat Khatuov gave an interview to the Interfax agency on the sidelines of the Russian Investment Forum in Sochi

Agricultural complex, where private investments have also rushed to following state ones, now claims to become a stimulating principle for related industries as well. First Deputy Minister of Agriculture Dzhambulat Khatuov told in an interview with the «Interfax» IA, taken on the sidelines of the Sochi Investment Forum, about measures that the Ministry of Agriculture plans to take in order to increase investment activity as well as volumes of production to be entering to international markets, reasons of transfer of the state agricultural development program to project management, and why it is necessary to expand the powers of Rosselkhoznadzor (Russia’s agricultural safety watchdog).
— The record harvest of grain, which was collected last year, caused pricing problems, due to overstocking of the number of regions. Subsidizing of grain transportation from regions remote from ports, primarily Siberian ones, reduced the issue severity to some extent. Does the Ministry of Agriculture plan to use this mechanism for the grain market regulation in future, or it is a one-time measure?

— We have been receiving high grain yields steadily over the past few years. Last year was marked by a new record — 134.1 million tons, which will increase our export potential to 45-47 million tons.

The decision to subsidize transportation expanded the geography of grain suppliers. Thanks to it, 13 more regions, including Siberian ones, were added to the list of regions traditionally engaged in export.

To date, out of 3 million tons of grain are planned for transportation according to subsidizing scheme, 500 thousand tons have already been transported. Currently everything looks pretty stable. So the new created assistance mechanism proved to be quite effective, and we are confident that it will be used in the future.

Price disproportion exists regardless of the crop size. It’s just that the situation has aggravated this season due to the general market overstocking. Therefore, we will continue to support supplies from the interior regions of the country, in order to equalize prices between regions.

These are already the system results. We also realize, of course, that everything related to export today works up to a certain limit. The issues concern infrastructure, existing transportation capacities, the fleet of wagons etc.

— What about the current shortage of grain carriers? How can this problem be solved?

— We estimate the shortage of grain-carriers at 7,000 pieces. This is 23% of the total working fleet of such kind of railway cars. But we also face the lack of elevator capacities and elements of transport infrastructure. Thus this creates an incentive for investments in those sectors of economy that produce such products, since the profitability of the business sectors associated with grain transportation and storage has increased.

— After the intervention of the Ministry of Agriculture in the situation on the Siberian grain market, some experts accused it of micromanaging the industry, and that the traders were allegedly forced to export grain. Are these accusations justified?

— This is not about micromanagement, the issue is related to emergency launch of the mechanism in crisis situation.

All forms of monitoring are good if resultative. And if we talk about the reaction of the Ministry of Agriculture as an authorized body that has balance sheets, instruments for analysis and monitoring and regulates agricultural market to the certain extent, then its reaction to the situation was quite justified.

As for the call addressed to operators, exporters and grain traders to work actively with the regions, this position is absolutely rational. United Grain Company, an operator with state capital, also takes part in this work. But everything takes place exclusively in the form of commercial component and the interests of farmers are put in priority.

In general, the situation on the grain market remains stable. We eliminated the market’s anxiety concerning prices, because many players were ready to sell grain with the serious discount, fearing further price reductions.

At the same time, low grain prices create the basis for feed price stabilisation and, accordingly, for stabilisation of the prices of livestock products.

The situation with increase in grain prices as a result of the grain export from a number of regions did not affect consumer prices in any way.

— What is the grain yelds forecast for 2018?

— First of all, I want to say that the Ministry should always use conservative approach to forecasts, because there are many factors that ultimately affect the volume of manufactured products. An accurate forecast can only be made in barns.

Based on the state of winter crops, the readiness of farmers for spring sowing, the current situation is relatively stable. It confirms that Russia will produce 110 million tons even if certain external factors will occur. In particular, we mean weather conditions.

We still have a certain cycle of risks ahead. But in general, however, we are confident that 110 million tons or more are the volume that will be certainly produced according to grain market experts, including our respected scientists and agronomists.

— The Ministry of Agriculture in recent years has stepped up contacting with experts, and sectoral associations of the agro-industrial complex. However, some of them, primarily grain growers, complain that there is no «institute of forecasts» in the country, that the Ministry does not always listen to their assessments. Is it fair? To what extent does the Ministry of Agriculture rely on the forecasts of market experts?

— We believe that we have achieved a lot in relations with experts, but, of course, some reserves still remain. We have a powerful and professionally represented expert group of industry unions. A large group of international experts is also available. When making certain decisions, we are guided by their opinion and analysis.

But the format of expert assessment has no perfection limit. In order to understand the processes, we are developing a completely different level of communication with the regions. A special analytical center has been created in the Ministry, to expand its potential, we have organized access to its information, which is constantly updated.

Every week, via videoconference, we hold meetings of the operational headquarters to discuss monitoring and regulation of the grain market with the participation of at least 50 regions.

— The development of the grain market is largely associated with the development of its export opportunities in the eastern regions. In addition to the Far East Grain Terminal, the construction of the Grain Terminal Zabaikalsk is also included in plan. Are there any difficulties associated with the fact that this project is being implemented by a private company on the Russian side, and a state-owned company on the Chinese side?

— A strategic facility — the Far East Grain Terminal, which is being built by the United Grain Company. The design phase is currently underway.

But we are also optimistic about the project of Grain Terminal Zabaikalsk construction. Yes, the peculiarity of this project is that it is being implemented by a private company on the Russian side, and a state-owned company on the Chinese side. And, of course, we understand that the pace of resolving all issues on the Russian side must comply with all the procedures to be coordinated bilaterally. Therefore, the necessary legal procedures are being completed, and construction and installation works will be started this year.

Last December, in Shanghai, within the framework of the project called «New Land Grain Corridor Russia-China», a tripartite document between the participant companies — Grain Terminal Zabaikalsk, Siberian Grain Project, and Shanghai Energy Equipment companies was signed. Under this agreement, it is planned to attract more than 220 billion rubles of investments by 2026.

— The growth of the crop yelds also set the task of increasing its use in the domestic market. What are the main directions here? By what amount can domestic consumption be increased?

-Talking about domestic consumption, we mean a strategic direction — the animal husbandry development. In recent years, quite significant positive results have been achieved in poultry and pig breeding, positive trends have been outlined in the production of cattle meat and milk. In the next five years, up to 5-7 million tons will be additionally spent on animal husbandry sector.

Today, the total domestic grain consumption amounts to 76 million tons per year.

Of course, there are some reserves in the flour milling industry. Investments in this industry, as well as in the development of elevator capacities, which should be made in the coming years, will allow us to export not only high-quality Russian grain, but also flour. Between the regions oriented towards Asian markets colossal reserves in this direction are located, for example, in the Altai Territory and Novosibirsk Region, as well. Petersburg flour millers say that they can multiply the flour exports volume.

Investment projects in the grain processing sector are rather complicated, with at least 8-10 payback years. Today, governmental support measures which stimulate these projects have reached these industries. And we expect that further production of lysine and bioethanol will allow increase domestic consumption by at least 12% in the coming years.

At the Sochi Forum, a fair idea that the tone set by the country’s agro-industrial complex looks like an investment drive today. This is a vector for investments in various sectors, from the production of grain railway cars to «river-sea» ships, in order to use potential of the Volga river in order to reduce the transportation costs when exporting through the Caspian Sea.

— Last year, a new concessional lending mechanism was launched. The Ministry of Agriculture has already said that it has become an effective way to attract funds. Have all the plans been actually implemented? Does it require any improvement?

— Yes, an effective lending mechanism for agro-industrial complex is being developed. We observe a rather high demand for loans. It may be said that we witness a credit boom. Loan agreements signed last year totalled 656 billion rubles, including 454 billion rubles of investment loans.

To understand in which extent this newly launched mechanism has satisfied actual demand, it is enough to compare the indicators of subsidized investment loans in 2016 and 2017. In 2016, loans totaling RUB 152 billion were subsidized. In 2017, applications for 454 billion rubles were approved.

We have been adjusting this mechanism for a year. In particular, the powers of the regions in terms of maximum size of soft short-term loans were extended and the share of soft loans for farmers was increased. Farmers who received a regular short-term loans after July 1, 2017, were provided with the opportunity of transferring to a preferential lending mechanism, and from January 1, 2018, it became possible to refinance a preferential investment loan that had been taken earlier. This year we will continue to improve the mechanism, but it is already clear that it has proved to be in demand.

— What is the lending forecast for 2018?

— The federal budget allocates RUB 50 billion for development of preferential lending mechanism. However, 73% of them will be spent on subsidizing loans taken in 2017. We have preserved 13 billion rubles to subsidize new loans, which will create the possibility to issue soft loans for approximate amount of RUB 230 billion.

— Since 2018, the state agriculture development program has been transferred to the project management. What are the benefits of this measure?

— The main idea of this maneuver is to highlight the industry strategic priorities. In the context of the current budgetary constraints, it is very important not to scatter available funds, but to ensure their implementation by identifying priorities. Therefore, we refused to use a large number of unclear and sometimes even incomprehensible indicators, and have approved five strategic goals with unambiguous targets in the new version of the state program.

The directions are as follows: food security ensuring, added value increasing, increasing the growth rate of agricultural products exports, increasing investment in agriculture and the volume of household resources available in rural areas.

Following the logic of project management, we will only execute those projects that will make maximum contribution to the achievement of these five strategic goals. The remaining tasks of the state program will be carried out within the framework of current activities of the Ministry. For this purpose, the state program provides for a special, so-called process part. Therefore four strategic projects have been selected to the date. The first one of these projects is aimed at developing industries that provide import substitution, the second one will help to attract investments, the third one is aimed at agro-industrial complex modernization, and the fourth is aimed at supporting exports. I am certain that the logic of the project approach along with concentration of efforts on the key issues will have effect.

— What are the prospects for the development of dairy farming, which had overcome negative indicators last year? Have the reserves to increase milk production volume been detected?

— That’s true, last year became a turning point for the dairy industry. After several years, production increased by 1.2%, despite the decline in personal subsidiary plots. Moreover, growth rate has reached 4% among agricultural enterprises, and 8% among farmers.

The first 500,000 tons that we added to volume last year were just the beginning. We will annually increase in volumes at least not lower than these indicators. We introduce new complexes, provide a grant support for farmers, family farms are developing dynamically.

98 investment projects were implemented last year. In addition, the Ministry approved preferential investment loans for the dairy industry totalling RUB 89 billion, which will provide the possibility of construction and modernization of farms for 250,000 heads and an additional 1.5 million tons of milk.

If all the reserves in dairy cattle breeding sector are used, an additional 2 million tons of milk can be produced, and more than 32 million tons of milk can be produced by 2020 in total.

But we must understand that production of milk is not a single issue. And now we need to convince the industry processors that the growth will be stable and irreversible. We expect that further work with technical regulations and proper interaction with the consumers will help to orient customers towards dairy products produced from whole milk. We are not satisfied that the current milk balances of the regions, which we constantly analyze, indicate that a number of dairy processing enterprises develop their business strategies on the use of milk powder. Not to mention the fact that the content of vegetable oils in products presented on shelves is hidden.

We have to conduct a serious analysis in many regions in order to ensure the use of the whole milk strategy in activities aimed at modernization of the dairy industry.

We will force everyone who has tried to use various substitutes for manufacturing to respect the Russian milk. This is a matter of near future.

— Is it planned to increase Turkey’s quota for the supply of tomatoes?

— According to official information, with the current quota of 50 thousand tons, 4.5 thousand tons of tomatoes have been imported for today, so it is not necessary to say that this quota does not satisfy (Turkey — IF) within the framework of the state decisions reached. We will keep monitoring the situation, but we do not yet see the need to increase the quota.

At the same time, our greenhouse farms grew almost 1 million tons of vegetables last year using greenhouses. The increase in greenhouse areas by almost 300 hectares per year is the pace at which we will move in the next five years. This is the vector of investments today.

As for vegetables from other countries, here consumers have wide choice, including products imported under the quota from Turkey.

The issue of expanding the powers of Rosselkhoznadzor (Russia’s agricultural safety watchdog) in connection with the spread of dangerous animal diseases in the country has been discussed for several years. What offers have been made?

— In order to fulfill the tasks we set in the field of animal husbandry, primarily in the pig breeding, it is necessary that all animals are protected from diseases, especially from such dangerous ones as African swine fever. This disease threatens not only the pork exports, but even the very existence of pig production as an industry.

For the proper implementation of all preventive measures, first of all, strict regional discipline is required, as well as the impeccable performance of the powers obtained by regional veterinary services, which are not subordinate to Rosselkhoznadzor (Russia’s agricultural safety watchdog). Therefore, the issue of empowering Rosselkhoznadzor (Russia’s agricultural safety watchdog) with the authority to control regional veterinary services looks quite reasonable. The relevant bill draft has already been presented for the government’s consideration. It also provides for granting Rosselkhoznadzor (Russia’s agricultural safety watchdog) the right to regulate the number of wild boars in hunting and specially protected areas. The authority will obtain such powers in near future.

We also put great hopes on the introduction of electronic veterinary certification. This is one of the key issues, which solution will eliminate falsification of products and support conscientious manufacturers.

We are confident that in six months electronic veterinary certification will be functioning in full force. Today, 50 regions are ready, the Mercury system is undergoing all kinds of test loads. It already contains records on 1.3 million individuals and legal entities.

Naturally, in initial stage business representatives perceived it with caution. But while meat producers and processors are interested in it, some milk processors have different opinion on the issue. Today, all the arguments against electronic veterinary certification have been completely depleted, so the decision must be implemented.

— What is the food inflation forecast for 2018?

— At the end of last year, food prices grew more slowly than inflation rate as a whole. Food prices rose by 1%, while prices for other goods rose by 3%, for services — by 4%. This difference is explained by the fact that food production is actively growing, the assortment is expanding, and the share of imports is decreasing.

Concerning the forecast for the current year, we expect that the trend towards an increase in agricultural production will continue, this will make a restraining effect on food inflation.
Source: mcx.gov.ru
Image source: photogenica.ru