This year, Russian agricultural producers face four main risks: availability of machinery and equipment, logistics and storage of grain, lack of seed stock and lack of qualified personnel. This is stated in a press release by Yakov & Partners (founded by partners from the Big Three agencies: McKinsey & Company, BCG and Bain & Company) received by the editors of socialbites.ca. The company identified these threats to farmers based on a survey among managers and experts of Russian agro-industrial companies. He also summarized his findings in a separate report.
According to the farmers, the main problem in the new season will be the inability to buy and maintain self-propelled equipment. 34% of respondents pointed to insufficient tractor supply. 25% of respondents reported problems with lack of combine harvester, 11% of respondents said they have trailer equipment.
“In practice, the entire range of equipment needed to work in the field requires accelerated localization processes, from entire units to individual components,” said Alexey Poroshkin, a Yakov & Partners expert and one of the report’s co-authors.
The second risk concerns the record harvest of 2021-2022, which actually has nowhere to go due to the logistical problems that have arisen in the current situation.
“Many farmers reported a record harvest. In the Volga and Southern federal regions, 54% and 60% of agricultural producers, respectively, declared that they exceeded their plans. Due to record harvesting and logistical problems, tens of millions of tons of grain are in storage. Most likely, they will move on to the next season. At the same time, almost half of the respondents found it difficult to answer the question of what to do with the balances that have already accumulated, ”Poroshkin said.
Poroshkin estimated that in 2022-2023, stocks of finished grains in Russia could reach 26 million tons, 17 million tons for wheat.
“Therefore, at current prices, grain reserves worth about 260 billion rubles are in the risk zone, which is often associated with long-term grain storage. For this figure not to increase further, Russia will have to export its monthly grain volume close to a record – more than 4 million tons -” said Poroshkin.
According to him, this has already affected the margins of wheat producers (showing how much revenue the company generates per ruble of revenue). Poroshkin stated that this year, farmer marginality may decrease 1.6 times compared to last year and 3 times compared to the 2020-2021 season. The expert added that this could lead to a decrease in grain production, including wheat. According to their estimates, the decrease in production may be 13-19% in 2023-2024.
19% of respondents told Yakov & Partners about the lack of quality seed stock.
In the press release, the heads of the companies stated that “so far they have not seen high-yielding Russian wheat and barley varieties” and that it is possible to find acceptable alternatives for all crops.
The fourth risk Poroshkin called the lack of qualified personnel in the agricultural industry.
The Yakov & Partners survey was conducted at the end of December 2022, based on a survey of farmers. Farmers from 96 Russian companies with land banks between 20 thousand and 120 thousand hectares participated. The perimeter of the survey is 3.3 million hectares in 20 districts of the country in four federal districts.
Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.