OREANDA-NEWS. November 30, 2010. Vladimir Putin’s opening address:  Ladies and gentlemen,

During today’s teleconference we’ll discuss how the regions have organised support for the agricultural producers that were hit by the drought last summer.

The extremely hot summer has become a serious test of Russia’s entire agricultural sector. The drought hit more than 25,000 agricultural companies and farms in 43 regions. On the whole, the government promptly responded to this problem. It extended subsidies, loans and leasing payments, among other things.

It also reduced railway tariffs on transporting grain and flour from the areas that had a good harvest to regions in need. As we agreed in Rostov, this discount will be in force until July 1, 2011. The government also imposed a ban on grain exports in order to balance the domestic market and promote livestock farming. 

I’d like to use this opportunity to inform you that we have taken a major decision in the interests of domestic producers – in 2011 we’ll cut poultry imports to Russia practically in half. This was not an easy decision but we’ve taken it with a view to reducing imports in general and strengthening domestic agriculture. At our latest conference on agriculture and the performance of the agricultural sector in the outgoing year, many heads of companies and governors emphasised the need to decrease imports.

The government will pay special attention to the measures aimed at maintaining the cattle population and milk production. In the first quarter of next year we’ll allocate an additional five billion roubles from the federal budget to those companies that maintain their cattle stock.

And, finally, I’d like to speak about the main item on today’s agenda – the issue that has brought us together today. To keep the drought-affected companies in good financial shape the government has responded quickly and decided to allocate 35 billion roubles – 10 billion roubles worth of subsidies and 25 billion roubles worth of budget loans. The first batch of loans will amount to 15 billion roubles, and the first package of subsidies to 5 billion roubles.

These funds are designed to compensate for the losses of the drought-affected companies and enable them to conduct seasonal field work smoothly and to buy seeds, fertilizer, equipment and fuel and lubricants in time.

We should bear in mind that next spring agricultural companies will have to sow more in order to compensate for the autumn sowing losses that were also caused by bad weather. They must make up for the reduction in the area under winter crops.

For your reference, I can tell you that this year the area under winter crops has decreased by 2.7 million hectares compared to the autumn of the past year. In 2009 the autumn sowing area amounted to 18.2 million hectares against 15.5 million hectares this year.

Therefore, we are planning to increase the area under spring crops by 2.9 million hectares next spring, bringing it to 49.8 million hectares as compared to 46.9 million hectares this year.

In brief, our common goal is to prevent this year’s weather abnormalities from cancelling out the positive trends that we have fostered in agriculture in the last few decades. We must preserve the development potential accumulated in the last few years.

As of today, the government has transferred 20 billion roubles to regional budgets, and the regional budgets have got this money on their accounts, but the problem is these funds do not always get to agricultural producers quickly enough. This is why we have gathered here today.

There are examples of quick transfers, for instance, in the Belgorod, Vladimir and Volgograd regions, in the republic of Mari El and in Chuvashia. They have transferred practically all funds to agricultural companies. I’d like to emphasise that the heads of these regions are aware of the existing conditions and know what problems agricultural producers may face if they are not promptly supported. They know what assistance each of these companies needs.

And it must be noted that the regions where work has been organised properly are the regions in the lead, as a rule.

But some regions have a completely different approach. I won’t name the heads of the regions in which the transferred budget funds are still stuck in regional budgets. I won’t call you out in front of the whole country, but I will tell you straight that the substantial funds allocated by the government are not helping agricultural producers in your regions. According to the numerous reports I have received, some regions have done nothing in certain categories of support – nothing at all.

It turns out that the government has allocated the funds, but agricultural producers have not received them through the fault of regional authorities. I’d like to emphasise that we have detailed information on each problem region and we’ll talk to every governor individually. I’ll just say that this conduct is simply irresponsible and unprofessional. There are no other words for it.

Mr Zubkov, please go ahead.

Viktor Zubkov: Thank you. Mr Prime Minister, ladies and gentlemen, this year the situation in the agricultural sector has been under the special supervision of the government because of severe droughts. Weekly conference calls with the heads of regions and the business community have enabled us to take decisions that the situation warranted.

If the prompt measures referred to by the prime minister had not been taken in due time, the consequences for the sector could have been worse.

Indeed, 43 regions, nearly half of all the Russian regions, have been hit. Direct damage is estimated at 42 billion roubles, comparable to the gross annual agricultural output of the Samara or Kursk regions, for example. Given the scale of crop destruction, the prime minister issued instructions early in August to render immediate financial assistance to the affected farmers. The amount of state support (35 billion roubles) and the schedule of releasing the money in two tranches, two stages (20 billion roubles in September and 15 billion in November) were determined. Out of that sum, 25 billion roubles were disbursed in the form of budget loans for a term of up to three years, and two 5 billion tranches went to make up for immediate losses.

Most of the farms affected have considerable loan debt and their mortgage capacity is limited. As the prime minister has stressed, the main purpose of state support is to ensure financial stability of agricultural producers, to enable them to meet their loan and lease commitments in a timely manner, to stock up on livestock fodder, and to carry out seasonal work. These measures and this money will ensure next year’s crops as well.

A review of the process of transferring the first tranche has shown that while practically 90% of the 15-billion budget loan has reached the farmers, less than half of the regions which have received subsidies (15 out of 37) have started transferring that money to end recipients. As of November 24, out of 5 billion in subsidies only 2.2 billion, or 45%, has been remitted. Only four regions have managed to transfer the full amounts to agricultural producers. It is critical to deliver the subsidies now because they are building up material reserves for the winter and spring period. The main reason for the delays is said to be the lack of a regulatory framework in the regions, but it was decided in advance that these would be targeted subsidies. There was enough time – three months – to prepare the necessary legal acts. As of November 24, such acts had not yet been passed in 10 regions.

Since the heads of regional legislatures are taking part in this conference, I would like to draw their attention to the fact that today we are talking about bringing drought relief money to agricultural producers. Let us consider the situation. The government allocated 117 billion roubles of budget money this year. Out of the 88 billion roubles earmarked for support only 68 billion have reached the agricultural producers, and out of the 32.9 roubles allocated by the regions only 24.7 billion, or 75%, have been delivered to the producers.

The end of the year is one month away. And we are still slow in bringing the money allocated by the government and by your regional legislatures to the agricultural producers.

I would like to focus on the grain situation, because the price of grain goes a long way to determining all food prices. An analysis has shown that the decision to ban grain export was timely. If this had not been done, 12 million tonnes of grain might have been exported out of the country by this time.

Given this year’s harvest of 60 million tonnes, there would have been a considerable shortage in the grain market. Another problem today is the uneven distribution of grain reserves throughout the country. The main suppliers of grain to the domestic market are well known: the Krasnodar Territory, the Stavropol Territory, the Rostov Region, the Altai and Krasnoyarsk territories, and the Omsk and Novosibirsk regions. As for the southern areas, they have a grain surplus of some 10 million tonnes.

During the month of October, 400,000 tonnes have been transported by rail from the south. At their meeting in Rostov the governors called for tougher veterinary regulations. After that conference we in the government quickly finalised all the issues connected with the adoption of the veterinary law. It passed three readings on November 26. It is now pending before the Federation Council. I hope that it will be endorsed by the Federation Council and signed by the president in short order.

Without waiting for the adoption of the law and supporting legislation, I would like to ask the Agriculture Ministry and Rosselkhoznadzor (Federal Veterinary and Phytosanitary Supervision Service) to take more specific measures to tighten the rules for the carriage of grain, especially by road. The grain destined for pig-breeding farms should be thermally treated and granulated. The capacity for this exists.

 Special thanks are due to the administrations of the Republic of Tatarstan, and the Bashkortostan, Belgorod and Yaroslavl regions for their active measures to purchase and transport grain from the south by rail.

Regarding Siberia, fair weather in the Siberian regions made it possible to bring in a good enough harvest. The farms made good money selling buckwheat, sunflower seed and grain. The good price situation makes Siberian farmers confident of their financial future. However, some farms have been hoarding grain until spring, and I don’t think that is right. The current prices on the grain market are quite acceptable, around 6,000 or 6,500 roubles per tonne. Grain must freely circulate in the market. That is why, Mr Putin, I wonder if you could look to see what other mechanisms we could use to maintain the normal functioning of the grain market. I think it would be the right thing to do.

The other day the government had a conference call with the regions on the development of livestock farming and preparation for the spring sowing season.

As of November 1 the production of meat, in spite of the very adverse conditions this year, had increased by 12%. Pork production increased by 120%, and poultry meat by 113%. In some regions, growth has been higher. However, in the Smolensk, Samara, Tver regions, in Chvashia and Bashkortostan production has dropped.

Consumer prices for meat are stable and are not rising. Meat imports have declined by almost 20%. But we know that 23% less fodder has been stored up than in 2009, even though budget funding has been made available. It is necessary to replenish fodder stocks by procuring fodder from other regions. This has always been the case: the regions which for some reason had not managed to stock up on fodder bought fodder from the regions where there was a surplus. This practice will be particularly helpful this year. Milk production has also gone up in some regions while falling in other regions, for example, in the Tula, Smolensk, Penza and Kostroma regions. By the way, these regions had no drought, yet their milk production has declined markedly. We should take a closer look into why that happened.

However, the procurement price of milk is at an all-time high, 14.82 roubles, which is 53% more than last year. This should encourage milk producers to increase output.

Regarding the spring season, next year the size of the harvest will determine price stability in the food market in 2011. Because of the bad conditions during the autumn season in the drought-stricken regions, spring sowing should be increased by almost 25% to 33-35 million hectares. This year 28.4 million hectares have been sown with grain in spring.

I would like to ask you, Mr Putin, to find additional funds: one billion roubles to create buffer stocks of seeds, one billion roubles to stimulate the purchase of mineral fertilizer and five billion for farms that manage to maintain their cattle population, as you said in the first quarter.

On the whole, the issue of the spring season is under constant review and the relevant instructions have been issued. The heads of regions are asking to extend through 2011 the government resolution on supplies of fuel and lubricants to agriculture at cut prices, something we did this year also, that is, 10% off the wholesale price. That’s the first thing.

Second, you have issued instructions on extending discount rates for grain transportation, extending the current Resolution until July 1, 2011. I would like to ask you to reiterate this instruction to me today so that I could settle these issues with the ministries concerned.

I would appreciate your support for these proposals, Mr Putin, and if you would include them in the minutes of this meeting.

Thank you.

Vladimir Putin’s closing remarks:

Ladies and gentlemen, let’s sum up our work today.

I would like to point out that we made a point of inviting regional heads and representatives of regional legislatures, agricultural associations and industrial unions to participate in our joint work.

In this respect, I’d like to say the following. It’s late November already, December is approaching and before you know it, December will be over and the New Year will be upon us. After that, we will all have long vacations and enough time to rest up. But for the time being we still have a lot to do. This is a very important point in time. Please stay focused.

As for the outcome of our discussion today, let’s agree that all the funds that are still lingering in accounts must be immediately transferred to the agricultural producers affected by the drought, to those whom these funds are intended for. I ask you to submit reports on the execution of this instruction, signed by your region’s governor, to the government by the end of this week. I ask you to personally check everything and sign a document to that effect. These reports of regional heads will be analysed to identify how various regions used the funds they received.

The second tranche of 5 billion roubles will be distributed among the regions whose governments managed to organise the work properly and quickly transfer funds over to the farmers, providing actual help to them. In this case, the funds will be set aside. I don’t think that we should raise our voices, stamp our feet or clap our hands today. We all have work to do, and we have everything we need to do this work.

Our discussion today revealed that the majority of our regions are working efficiently. But the situation is such that we cannot allow even the slightest failure.

I would also like to respond to Viktor Zubkov’s request on behalf of governors. As agreed, in the run-up to spring field work we will allocate an additional 1 billion roubles for seeds and 1 billion roubles for fertiliser. These funds have already been reserved by the Ministry of Finance. I ask the Ministry of Agriculture and the Ministry of Finance to prepare for this and provide this aid on time, in addition to the 5 billion roubles that we’ve been speaking about, to farms that maintain their cattle livestock.

Now I’d like to comment briefly on the grain market. Sluggish grain sales can be explained by the fact that some agricultural enterprises, which have enjoyed a fairly good or very good harvest despite the drought, want to, let’s be honest, cash in on the situation by waiting till the market goes up and their goods become more expensive before selling them at a higher price. Participants in today’s meeting and experts have noted this.

In this respect, I would like to say that, first, we are providing aid to rural communities. Our meeting today and the information that our colleagues have shared are the best evidence of this. Through banks, through the government and regional authorities we are working with the producers of fuel, oil and mineral fertilisers. Naturally, there are certain problems, and I will mention some of them later, but you all know that we are constantly working on these issues.

We rightly expect our agricultural producers to act responsibly and respond promptly to government aid. I would like to emphasise that we have enough tools at our disposal to maintain prices, and like other government, it is our obligation to use them. We cannot allow drastic surges in food prices.

What tool from this set could we use? One measure has already been mentioned – selling grain from the intervention fund. We are keeping this option in mind. This is why we have set up this fund. We will find the most opportune time to sell this grain on the market.

Second, I have agreed with my counterparts from countries that were not affected by this year’s drought, or were not as seriously affected, to reserve the necessary amount of crops for Russia. If it is necessary, and if we see that prices are rising, we will implement our arrangements and direct these additional amounts of grain to the Russian market.

As of this day, and this has already been mentioned, the price is fairly high – it is between 6,000 and even 7,000 roubles. On this point I would like to say that there is no need to take the risk and wait, no need to spend additional and rather significant amounts of money to store this grain and keep it safe and secure. We need to start working.

Now let’s move on to the issue of rising prices for fuel and oil. We all know these manipulations. The tricks are easy to spot. We will be working on this issue, just as we are working with producers of mineral fertilisers. You have seen that the instruction to the Ministry of Economic Development has been formulated. We will analyse the situation and take appropriate measures.

Thank you all for your work today. I’m looking forward to your reports.