New Economic Policy for Belarusian Countryside
In 2011 companies affiliated with the Ministry of Agriculture and Food of Belarus exported products worth $2.479 billion, or 112% as against 2010
In 2011 companies affiliated with the Ministry of Agriculture and Food of Belarus exported products worth $2.479 billion,
or 112% as against 2010
The government support policy launched five years ago has laid a firm foundation for the sustainable growth of agricultural production and supplies of farm produce.
The consistent implementation of the government rural revival and development program helped maintain the national food security and make Belarus a major food exporter. However, today Belarusian agricultural producers are facing new challenges: to enhance the efficiency of the industry, make it profitable and self-reliant, and preserve the optimal price/quality ratio for domestic and foreign consumers. The Single Economic Space (SES) that Belarus is part of will open new opportunities for farmers but will also toughen competition in the agribusiness.
A lot has been done to build and expand the physical infrastructure of agricultural and processing companies and social infrastructure of rural communities. A focus was made on the development of agrotowns.
These efforts made Belarus the CIS leader in terms of per capita agricultural output and propelled our country to the top positions in the production of milk, potatoes and meat. Even in the economically challenging year of 2011, the agricultural industry managed to preserve positive trends.
According to the National Statistics Committee, the output by all categories of agricultural producers in 2011 rose by 6.6% compared with 2010 and made Br56.7 trillion. The figure increased by 9.6% in agricultural companies. The leading farm producers were Gomel Oblast ( up 9%), Vitebsk Oblast (8.4%), and Mogilev Oblast (7.1%).
In 2011 the grain output by all categories of agricultural producers made 8.4 million tonnes (afterprocessing weight), up by 1.4 million tonnes (or 19.9%) compared with 2010. The increase in grain production was reported in all the oblasts. It rose 1.4 times in Vitebsk Oblast, 1.3 times in Gomel Oblast, 24.6% in Minsk Oblast, 13.5% in Mogilev Oblast, 9.4% in Grodno Oblast, and 3.8% in Brest Oblast.
The yield of grain and leguminous crops made 32.3 centners per hectare against 27.6 centners per hectare in 2010. Grodno Oblast boasted the biggest yield of 40.2 centners per hectare. A total of 260 Belarusian enterprises (or 17% of all domestic grain producers)
posted the grain yield of over 40 centners per hectare.
In 2010 the yield of potatoes made 226 centners per hectare vs. 214 centners per hectare the year before. The yield of vegetables reached 273 centners per hectare vs. 247 centners per hectare in 2010. It is noteworthy that the gross production of potatoes by all producers fell by 110,000 tonnes (by 1.4%), that of vegetables by 355,000 tonnes (by 15.2%). This is attributed to the reduction in potato and vegetable production by individual farmers – the land under potatoes reduced by 12.3%, the land under vegetables reduced by 28.1%.
In 2011, 46,000 tonnes of flax fiber was produced in Belarus, up by 0.6% compared with the previous year. The gross production of sugar beet made 4.5 million tonnes, up by 18.9% over the year before. The flax fiber yield reached 7.5 centners per hectare, that of sugar beet 453 centners per hectare. In 2010 the figures stood at 7.7 and 395 respectively.
The production growth improved the financial standing of agricultural producers. According to preliminary estimates, the overall profitability of sales in agriculture made up about 8% producing a fiscal effect of about 14%. The net profit is estimated at approximately Br2.5 trillion.
At the same time, 11 out of 16 targets were not hit. The flax production was unprofitable, just like cattle breeding.
Despite the overall positive trends that emerged in 2011, the financial standing of agricultural companies remains complicated and unstable. The constant monitoring has revealed that about 620 agricultural companies (47% of their total number) have a low profitability rate. Many companies lack own working assets; their debts, including outstanding debts, are mounting, which impedes the development of the entire industry.
As of 1 January 2012, the system debts were estimated at Br60 trillion, including about Br4.5 trillion of bad debts. Loans are growing more expensive, which remains a matter of serious concern. However, the majority of loans (68%) are longterm financial resources obtained for investment purposes.
Bridging the alarming gaps in the agricultural industry will be a major challenge for 2012. This issue was discussed during the workshop for agriculture senior executives in Mogilev Oblast at the beginning of the year. From now on, financial position of farms should be the key issue on the agenda of their executives, Deputy Prime Minister of Belarus Valery Ivanov emphasized in his statement.
It is impossible to work further without economic calculations, without specific development programs for each and every farm, underscored the Vice Premier. It is clear that without a market-based mechanism of management, entrepreneurial initiatives and foreign investments it will be impossible to make the agriculture industry more effective, build up export capacity and, consequently, increase income of rural residents.
Belarus is upgrading state regulation of agriculture taking into account international practices
and the regulatory framework for the Single Economic Space. The focus will be made on the development of market mechanisms in pricing, motivation and evaluation of work depending on the financial and economic performance of agricultural enterprises, and on the improvement of the organizational structure of the agriculture industry through the development of cooperative-integrative associations of manufacturing, processing and trade organizations.
According to the socio-economic development projections for 2012, gross agricultural production is to increase by 4-5% over 2011. Revenue from sale of farm produce and services is projected to increase 1.8 times, return on sales by 5%, labor productivity by 6%.
This is somewhat lower than the targets spelled out in the government program for sustainable development of rural regions in 20112015. The main reason is primarily the decline in financing available for sectoral and regional programs in agriculture.
Given the lack of funds, it is particularly important to ramp up the effort to raise foreign direct investments.
In 2012 the Agriculture and Food Ministry and regional authorities are expected to raise at least $99 million in foreign direct investments ($25 million for agriculture and $74 million for the processing industry).
Enhancing the efficiency of all branches of agriculture is one of systemic measures aimed at increasing the efficiency of the industry as a whole. However, much attention will be given to the livestock sector as it accounts for major sales and export revenue.
To build up the productive capacity in 2012, there are plans to construct 104 new dairy farms and upgrade 1,198 facilities, create 10 new and retrofit 80 existing broiler poultry farms, set up two new and upgrade six active hog breeding farms. These measures are expected to promote growth in the cattle, pork and poultry production.
In 2012 milk production is projected to increase to 6.5 million tonnes, up 11% as against a year earlier. In 2011 agricultural organizations of Belarus sold more than 5 million tonnes of milk, which was up 4% over the previous year. The quality of milk is improving thanks to the construction of new farms, modernization of existing ones (87 such objects were commissioned), use of modern-day technologies, and improved animal feeds.
Today supreme quality milk accounts for nearly half of the milk produced in Vitebsk and Mogilev regions, 46% in Gomel Oblast, 34.1% in Minsk Oblast, around 25% in Brest, and 21.3% in Grodno. In 2011, the sale of “extra” grade milk went up 2.7 times from the year earlier.
However, the productivity of milk herds decreased as compared to 2010 (46kg of milk down per cow). All in all, the productivity fell in 36 districts of the country. That is why it is important to meet the targets regarding construction and upgrade of dairy farms. This will allow increasing productivity and reducing costs. By 2015 milk production is projected to increase to six tonnes per cow. The number of herds will increase significantly.
The Belarusian agribusiness has a big potential to build up exports. In 2011 the Agriculture and Food Ministry sold $2.479 billion worth of products abroad (up 12% from 2010). The bulk of deliveries were dairy products (58.6%), meat and meat products (30.4%), casein (3.4%), and eggs (1.5%).
According to the National Statistics Committee, agricultural supplies to the Russian Federation totaled $2,208.9 billion last year (up 10%). The recent price hikes on international food markets have been advantageous for Belarus. Market trends in the agricultural sector, however, are quite volatile, which increases the risks of relying mainly on one sales market. Therefore, Belarus does its level best to diversify supplies.
Last year food supplies to the CIS (apart from the Russian Federation) made up $156.8 million, up 1.4 times on 2010. Deliveries to non-cis countries were worth $113.2 million
(up 20.7%), including $91.3 million to the EU (up 10.4%).
In 2011 the Agriculture and Food Ministry sold into 48 countries. The largest importers of the Belarusian agricultural produce besides Russia were Kazakhstan, Azerbaijan, Germany, Poland, Ukraine, Lithuania, Moldova, the USA and China. The supplies to the non-cis included casein, flax fiber, cattle hide.
The Agriculture and Food Ministry had a trade surplus of $1.432 billion, up $76.3 million from 2010.
Belarus is expected to export $5 billion worth of farm produce this year. Local farmers intend to build up their presence on the traditional markets and expand into new sales areas. There are plans to launch exports to Iran, Egypt, and Indonesia. Special emphasis will be put on cooperation with the European Union. This year the export to the EU market is projected to reach $100 million.
On the whole, the Agriculture and Food Ministry is expected to earn a $1.755 billion trade surplus in 2012. Export growth is likely to make up 111% as against the previous year.
To meet the target the ministry will have to considerably increase exports and reduce imports by at least 8%. There are also plans to diversity meat exports, especially products with a higher added value.
Another measure to boost the export is to increase the sales of potato, vegetables, potato and grain seeds, and breeding stock.
Purchase of goods outside the country will be kept under special control. According to the Ministry of Agriculture and Food, financial expenditures on imports are unreasonably high. For example, it does not make economic sense to purchase mineral fertilizers in the peak time. The regions fail to use the mechanism of bulk purchases, which is an essential reserve for reducing imports.
SES: New Realities
Enhancing efficiency and competitive power of the agricultural sector is getting crucial in the light of Belarus’ commitments under the agreement of the Single Economic Space (SES) signed by the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation. The agreement on single rules of state support in agriculture took effect on 1 January 2012. The document envisages gradual reduction of public support (which actually has a bad impact on trade according to the WTO classification) from 16% in 2011 to 10% in 2016.
Government funding of the national agricultural sector is envisaged at Br11.4 trillion this year (2.3% of GDP and 8% of the consolidated budget). Of them Br6.5 trillion will make up budgetary resources and Br4.9 trillion will come from local budgets.
Taking into account new approaches, budget funds will be used to finance government measures to promote agriculture. Such measures will have an important social and economic impact and will not hamper production and trade in terms of international classification practices. These include measures to preserve soil fertility,
reclamation, personnel training, scientific research, anti-epizootic and phytosanitary measures, etc.
The government will also sponsor targeted programs of agribusiness development and big investment projects which require a lot of resources because of long payback periods. On the whole, companies of the Belarusian agro-industrial complex are planning to implement 15 national and industry-specialized programs by 2015.
It is worth saying that open tenders will be held to choose legal entities to implement important investment projects using state support, including projects to build livestock farms, facilities for storage, processing, and marketing of agricultural products. The bidders will present business plans which prove that budget resources will be used efficiently.
In 2012 agricultural companies will also receive budget subsidies to buy fertilizers, protection agents, fuel and lubricants, spare parts and other commodities. Funds will be provided in accordance with standards regarding the produc- tion volume and land area with due account for cadastral valuation. This approach will ensure access to government subsidies for all agricultural companies regardless of their form of ownership, subordination, and size.
The development of integrated economic processes and transition to market relations require the improvement of pricing mechanisms. For Belarusian farmers it makes economic sense to gradually increase purchase prices for agricultural products and equalize them with the prices in neighboring regions of Russia.
Of course, prices for agricultural products on the Belarusian market should be equal to respective prices in Russia. However, according to the Ministry of Agriculture and Food, purchase prices for animal products in Belarus are 40-70% lower than those in Russia. The same can be observed on the market of crops.
In the current five-year term Belarus has embarked on the project to create technologically integrated structural holding companies and research and production associations not only in industry but also in agriculture. First of all, new agricultural associations should ensure effective promotion of agricultural products and food to foreign markets. Moreover, world practices show that large food companies can be the most effective form of business. Currently there are plans to set up holding companies in sugar and dairy industries. The Ministry of Agriculture and Food has already prepared two alternative projects to set up a dairy company and submitted them to the head of state.
The Council of Ministers and the National Bank of the Republic of Belarus decided to create a linen production cluster. Its main objectives are to set up competitive linen production, improve quality, select flax varieties needed to manufacture long flax fiber in cooperation with scientific research organizations.
The cluster will focus both on domestic and foreign markets of Western Europe, the Baltic countries, Scandinavia and the CIS. The company will be created on the basis of Orsha Linen Mill. The new cluster will help attract foreign direct investments to promote flax growing and processing industries. Investors will help modernize existing enterprises of the sector, replace equipment to increase short and long flax fiber production capacity, diversify the range of linen products, and improve their design and consumer properties.
At present the country’s agroindustrial complex operates 46 holding companies, which proved to be effective. They produce 18% of all agricultural goods in Belarus.
Every hectare of their land is three times more efficient than the land of other organizations. The absence of mediators in the “production-processing-sale” chain allows having extra income that is spent on the development of the holding company.
It is safe to say that the priority given today to qualitative parameters will enable the Belarusian agribusiness to focus on intensive development, and to consolidate its leading position both in the SES and global markets.
Pekarchik farm business in Gomel
Oblast produces vegetables and sells
them in Belarus, Moscow and Saint
The dairy farm Chernova, an affiliate of AgroBox-zootekh, uses resource-saving technologies and renewable energy, including solar batteries and wind mills
A new broiler complex of the Servolux company,
Mogilev District, can produce 20,000 tonnes of poultry
Konyukhi (Lyakhovichi District) is the largest sheep breeding company in Belarus (2,500 head). The company is planning to start processing wool, hides and meat
Linen Day is the demonstration of the best commercial collections of pret-aporter linen clothes
in Minsk. The show is held under
the auspices of Bellegprom Concern