Press-releases of the Embassy

GRAIN MARKET DEVELOPMENT

By Dmitry MEDVEDEV,
President of the Russian Federation

Since ancient times in Russia we believe that bread is the staff of life. This popular saying has reflected the very significance for mankind of such areas as agriculture and grain production. Food supply is the main resource of life, while the level of food production is the primary measurement of the living standards.

In this connection Russia is seriously concerned about the persistent acute global food crisis. Many factors contributed to its evolution, among them the growth of world population as well as the changing diet patterns, besides development of biofuel production from raw produce, climate change impact, and many other factors.

Last spring food prices in the world markets increased 55 percent, while rice prices in Asia almost tripled. The spike in the prices on staple food products severely hit the poor countries, where the share of the food costs averages between 50 and 90 percent. The level of hunger in the world is not decreasing. Today about 950 million are afflicted by famine. Whereas the point at issue is not just plain malnutrition, in many cases it is outright famine. In the 21st century this should sound especially outrageous, but such are the facts. In a number of countries where due to climatic conditions food production is underdeveloped the situation remains extremely unstable.

It is understandable that today the focus has shifted to the economic crisis. Yet, food market problems have not dissipated. Moreover they will remain to be urgent during the period of recovery from the crisis. Today global consumer demand for food commodities has decreased across the board. The food basket in the rich countries has been pruned down and is cheaper. In the poor countries hunger is on the rise. The "hunger-struck billion", i.e. those whose incomes according to international classification are not enough to receive food products at even the minimum necessary level, is already faced with the "golden billion".

Currently, there is a sharp increase in grain demand, because sustainable supplies of, and access to it are at the core of social and economic stability in a number of developing countries. Experts assert that by 2030 global grain consumption is projected to increase by 30 to 40 percent. It means that the international community is not assured against new waves of the food crisis. In this context, we welcome the idea that hold promise to establish a global food reserves management system. Such proposal has been articulated at the G8 Agricultural Ministers Meeting in Treviso. Its realization is deemed not only to facilitate grain supplies in the form of humanitarian aid to the countries in need, but also to reduce the risks of the world food market itself. Yet, it is important to reach a fair balance between the benefits of the export of food surpluses and the potential "dependency syndrome" (when regularly "fed" recipient countries may lose the spur to resolve existing problems by their own means).

Grain production is Russias traditional industry, thus its development determines the availability of bread products as well as efficiency of livestock production. Grain sales incomes form the main share of the profit of agricultural producers.

Last year favorable weather conditions, high natural fertility of arable lands, and timely government financial assistance to agriculture resulted in a record grain output of recent years that amounted to 108.4 million tonnes. Russia is determined to pursue this policy even amid the economic downturn.

I would also like to point out that the possibilities for expansion of area under crop in the majority of the regions of the world have been exhausted. Meanwhile, Russia is a leader in terms of area and quality of agricultural land. That is why since 1889 the International Bureau of Weights and Measures (Paris) keeps one cubic meter of Voronezh black soil a sample of soil structure and fertility next to the platinum meter bar. Russia owns 40percent of overall black soil soils with the highest natural fertility which represents a significant competitive advantage. Moreover, in the conditions of the current food crisis, development of 20 million hectares of Russian agricultural land, unused since 1991, could be re-launched.

With at least 14 percent of areas under crop, Russia's share in global grain production is only about 5 percent. In this regard, our prospects as a world exporter are clear. Effective use of Russian biological land potential and the shift to a full-scale production system matching bioclimatic areas could present an attractive solution. However, further studies that will involve expert and scientific community are needed.

Russia is aware of its responsibility and is now committed to realize its enormous agricultural potential and bring grain production to such a level as to ensure, together with other major agricultural producers, food security for asubstantial part of the world population. It is quite feasible to achieve this goal that seems to be proven by Russia's re-accession to the "club" of world's leading wheat exporters. Thus, in season of 2008/09, Russia is anticipated to supply about 21million tonnes of grains to almost 50 countries. The high-quality soft wheat is most in demand, since both developed and developing countries use it for flour production. Thus, contributing to the global food security Russian grain substantially ensures food supply in a number of countries.

Russia intends to expand its grain supply by entering new South-East Asia markets (with possible arrangements for the Eastern Development Corridor), and diversify our export mix through raising the share of processed grain products. We are prepared to take additional measures towards increasing production efficiency in agriculture, creating favorable environment for innovations and access of efficient agricultural producers to land and capital.

Naturally, our priority is the wide use of innovations in agriculture. We are ready to support long-term foreign investments in this area. By introducing intensive agriculture, using the technology of grain cultivation and increasing average crop capacity of wheat to 2.4 tonnes per hectare (achieved in 2008), it is possible to produce 112-115 million tonnes of grain per year. And with input of additional areas under crop 133-136 million tonnes. And today international organizations face a particularly important task to form a research program on such issues as development of technologies and providing access for all countries. In particular, the issue of including the supply of equipment and technologies into food aid programs for developing countries to promote domestic agrarian production is on the agenda.

Agricultural production can be effective only if there is an appropriate storage and transportation infrastructure. Therefore, the most important task for the near future is to ensure active support for infrastructure projects. This includes modernizing and creating new elevator capacities, developing the transportation system of transport networks and transshipment areas in the sea and river ports. The United Grain Company created in our country is called to ensure active State policy in this respect as well. It will work in the grain market like any other operator. At the same time it will fulfill certain State tasks, such as conducting intervention operations, as well as supplies under intergovernmental agreements and some other.

All these issues will be discussed at the World Grain Forum in Saint-Petersburg in the beginning of June. Russia has put forward this initiative. And we are confident that an open dialogue will give an opportunity to start solving many extremely complicated issues in the area of food supply.

01/06/2009