Embargo Extension for Another Eighteen Months to Have No Major Effect on Agroindustrial Complex

6 july 2016 | Agroinvestor

“Only entering new export markets, primarily poultry and pork markets, could become a key driving factor behind growth in the agroindustrial sector. Unless this happens, the end-of-the-year growth in the sector will total some mere 1.5%, chiefly on account of crop production,” this was announced by the Deputy Head of the Analytical Center’s Department for Expert Analytics Elena Razumova in her interview given to a correspondent of Agroinvestor magazine.

Elena Razumova
Elena Razumova
Department for Expert Analytics

In the last year and a half the agricultural sector has demonstrated priority development rates compared to most other sectors, and actually is one the few current drivers of economic growth, the bulletin reports. This year too holds a chance for this industry to make its positive contribution to the GDP. In 2016 its decline is expected to ease down to - 0.2% against the 3.7% drop in 2015, with the Ministry of Trade and Economic Development anticipating growth for the fourth quarter. According to the agency’s May estimates, the growth in the agricultural sector may total 1.5% after 3% in 2015.

Razumova named the grain production sector, particularly maize and soya production, as being relatively investment friendly because the global demand for these crops is predicted to grow throughout 2016. “As far as the processing industry is concerned, the most promising sector for investments is compound feed production. The situation in other industries will largely depend on entering the export markets and restoring the country’s food consumption trends,” the expert concluded.

As far as the embargo is concerned, it has been shown to have a positive impact on those sectors growth in which had begun long before the embargo was introduced – such include production of poultry, pork, cheese, butter and some vegetables, Razumova stressed. “The import curtailment combined with reduced domestic market capacity resulting from the decline in personal income has come as an opportunity for some sectors of economy to increase their share in the Russian market. That notwithstanding, investments in new production lines in the past two years were made on a significantly smaller scale than prior to 2014: the rates of investment in the agricultural sector’s fixed capital averaged -5.2% and -9.6% in 2014 and 2015,” the expert explained. She believes that this last year’s decline indicates that further production expansion is economically inadvisable, meaning that the expected embargo extension for another 18 months will not affect the agroindustrial sector to any significant extent. The Ministry of Agriculture believes, however, that extending the food import limitations would be a positive step facilitating long-term investments and building the competitive opportunities of domestic manufacturers, the bulletin concludes by noting.

Source: Agroinvestor