Russia’s burgeoning agriculture sector: lessons for South Asia and Africa

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As the World’s largest country, about 70% of Russia’s land area is estimated to be a high risk territory for agriculture with productive agricultural lands accounting for only 13% of the country’s total land size yet the agriculture sector continues to flourish, positioning Russia as an agriculture powerhouse in the World – in 2016, Russia became the World’s largest exporter of wheat. This was the first time such a feat was recorded in the country after the Russian revolution.

In 2017, Russia earned a revenue of $20 billion from agriculture export, becoming the World’s leading exporter of wheat, the second-largest producer of sunflower seeds, third-largest producer of potatoes and milk and also the fifth-largest producer of eggs and chicken. Russia recorded an upswing of 9% in the production of grain in the 2019 agricultural Marketing Year (MY), representing 123mn tonnes and an export of 45.5mn tonnes – recent projections show, Russia could have another good grain harvest in 2020. Between 2016 and 2020 Russia recorded its highest wheat production in MY 2018 with 86mn tonnes – the production of corn, barley and other grains is forecasted to increase in the next two years.

Source: Ministry of Agriculture. Russia

Although agriculture accounts for 3.7% of Russia’s GDP, the sector contributes close to 6% of total exports and serves as a source of employment for 9.2% of the country’s aggregate workforce. The sector is an integral component of the Russian economy,

Source: Deloitte CIS Research Center

playing an essential role between 2012 and 2017, when the country’s economic growth was declining – in 2016 and 2017, Russia’s wheat export exceeded that of the United States and the European Union, respectively. Russia currently holds 22% share of the global wheat market with the EU and the US accounting for 14% and 13, respectively. This is a remarkable achievement for a country that was close to becoming a net food importer a few years ago.

Russia has implemented germane policies that have augmented agricultural productivity – banning importation of certain agricultural commodities from the US, Europe and other western countries was a counter-sanction Russia effectuated after sanctions were imposed on Russia in 2014. This episode encouraged Russia to invest adequately in the country’s agriculture sector – with a $70 billion investment package to boost productivity in the agriculture sector via improved infrastructure and logistics, the Agriculture Ministry reported in the third quarter of 2019 that it is targeting grain production of 150.3 million tonnes by 2023, a conspicuous attempt that could prove to be instrumental in achieving the country’s target of $45 billion agricultural export by 2024.

Unlike Russia, where agriculture accounts for less than 4% of the country’s GDP and employs 5.7% of the entire labour force, agriculture accounts for 18% of GDP in South Asia and 15% of GDP in Africa – with a population of about 1.8 billion, thus almost 25% of the world’s total, agriculture employs 60% of South Asia’s population, the world’s most densely populated region. However, the impact of agriculture in South Asia varies from one country to the other – the region is home to Bhutan, Bangladesh, Pakistan, Maldives, Nepal, India and Sri Lanka. Despite the tremendous impact agriculture has in these countries, South Asia, hosts 22% of the world’s undernourished with a Global Hunger Index score of 30.5 – making South Asia the World’s hungriest region.

Also in Africa, the second most populous continent in the World after Asia, with a population of 1.2 billion from 54 countries, agriculture serves as a source of livelihood for about 65% to 70% of the total workforce, as highlighted by the World Bank. A report published in 2019 by the Food and Agriculture Organization of the United Nations indicates that 20% of Africa’s population is undernourished – out of the total 257 million hungry people on the African continent, 20 million can be found in North Africa with the remaining 237 million located in Sub-Saharan Africa (SSA).

With 282 million people in South Asia living below the poverty line and more than 413 million living in extreme poverty in SSA, South Asia and Africa host 80% of the World’s extreme poor despite, about 57% of South Asia’s land area being agricultural land and SSA having more than 200m hectares of arable land that is not used for agriculture – the uncultivated land in SSA is larger than the agricultural land of the United States and almost 50% of the World’s total.

However, Africa is a net importer of food as the region had a food import bill of $35 billion in 2015 – this value is estimated to increase to $110 billion by 2025. Out of the 15 foods that account for the most food imports, 5 are staple commodities: soybeans, rice, wheat, sugar and beef. Concurrently, the post postharvest loss for all grains in SSA is $4 billion a year – this amount exceeds the value of food aid SSA has received in the last decade. The situation is not different in South Asia, where food and agricultural imports increased from $5 billion in 1990 to $24 billion in 2010.

Conversely, Russia’s import ban on food and agricultural products from the European Union, United States, Australia, Canada and the Kingdom of Norway which began in 2014 and its operational in 2020, has compelled the transformation of the country’s agriculture sector – between 2013 and 2018, Russia’s food imports dwindled by 31.2%, thus, from $43.3 billion in 2013 to $29.8 billion in 2018. Within the same period, Russia’s food exports increased from $16.8 billion in 2013 to $25.8 billion in 2018. Russia’s continuous adequate investment in agriculture has increased productivity – between 2005 and 2013, an increase in agricultural inputs (land, labour, materials and capital) and growth in productivity accounted for 25% and 75%, respectively, of the country’s total agricultural output.

Whiles the challenges associated with the agriculture sector of Africa and South Asia are similar; the latter is making headway to improve agriculture productivity – although three-fifths of South Asia’s agricultural lands are rain-fed, the region has some of the oldest and largest irrigation facilities in the world, with an estimated 40% of the entire agricultural lands being irrigated.

In SSA, rain-fed agriculture is predominant with irrigated lands constituting only 6% of the total croplands, representing 13 million hectares. Whiles a new study suggests, adequate irrigation systems can enhance agricultural productivity by 50%, it will cost $65 billion to extend irrigation to 15% of the total cultivated land in SSA.

Apart from improving agricultural inputs and mechanizing the food value chain, massive investments should be channelled into developing the food processing industries in Africa – for instance, Ghana and Ivory Coast produce two-thirds of the World’s cocoa output but account for only $6 billion of the chocolate market that is worth over $100 billion worldwide. This is because for many decades these two West-African countries have been exporting cocoa beans without processing the commodity into finished goods.

About the Authors

Sumeera Asghar Roy is a PhD candidate in Plant Biotechnology of Fruits at the National Key Laboratory of China and a researcher at the China Agricultural University, Beijing. She holds a master’s degree in Horticulture from the University of Agriculture, Faisalabad, Pakistan with a Roll of Honour. Her research works on agriculture and plant biotechnology have been published by many reputable outlets in Pakistan and on the international scene.

Alexander Ayertey Odonkor is a chartered financial analyst and a chartered economist with a stellar expertise in the financial services industry in developing economies. He has carried out the International Monetary Fund’s (IMF) program on Financial Programming and Policies – with a master’s degree in finance and a bachelor’s degree in economics and finance, Alexander also holds postgraduate certificates in entrepreneurship in emerging economies and electronic trading on financial markets from Harvard University and New York Institute of Finance, respectively.

 

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