Agricultural policies and support
Russia - Agricultural Policy Monitoring and Evaluation 2011
Policy developments | Data | More on this report
Russia has increased support to agriculture over the long-term. Around two-thirds of producer support (PSE) derives from market price support, which is largely due to border protection. Livestock producers also benefit from the fact that prices of domestic grain are below the world levels. Budgetary transfers to producers are dominated by subsidies to variable inputs and investments.
Additional input subsidies and credit concessions were provided as part of the exceptional assistance to the sector in 2009-10, which contributed to higher support levels and to a rising share of most distorting support in the PSE. Nearly one-fifth of the total support to agriculture (TSE) is provided for general services.
- Producer support has increased since the mid-1990s to a level that currently exceeds the OECD average. This reflects a tightening of border protection for key agricultural imports and an increase in budgetary transfers to the sector.
- Agricultural support has been driven by a progressive orientation of policies towards import substitution. Particular focus has been placed on stimulating growth of livestock production through border protection and investments. The recent food price surges have increased concerns on import dependency and have further strengthened the focus on increasing domestic food supplies. However, the export ban on grains in place during the 2010/11 season acted as a disincentive for domestic grain producers and has had important spill-over effects on international markets.
- The stated policy objectives have been pursued at a relatively high cost to taxpayers and consumers and transfers from the crop to the livestock sector. The majority of support is provided through output and variable input subsidies, i.e. in forms that are potentially the most distorting.
- The recent increase in agricultural support reflects in part the significant relief assistance provided in 2009-10. The global economic crisis in 2009 and local droughts, including a particularly severe one in 2010, triggered additional input subsidies and credit concessions.
- Ad hoc assistance, although prompted by exceptional circumstances, has created future risks and associated policy challenges. Credit restructuring has increased producer debt exposure and has led to higher government commitment to provide interest subsidies. A careful steering of the agricultural debt will be required to avoid a debt spiral. Public funds were re-allocated away from land improvement, rural development, infrastructure, and farm services. A momentum in supporting these areas needs to be regained if the objective is to achieve the sustained development of the sector.
- Russia’s agricultural policy is at a particular juncture. The main national agricultural policy programme expires in 2012 and preparations for the next one have begun. World Trade Organization (WTO) accession is at an advanced stage and the country’s future commitments to reduce distorting support are being established. It is highly opportune to shift the policy focus from subsidising output and input prices to supporting long-term improvements of the sector’s efficiency and competitiveness, as well as creating an enabling institutional environment.
Russia: OECD Producer Support Estimates (PSE)
Level and composition by support categories, 1995-2010