Thursday, 4 December 2014

Russia requires $10bn to replace food imports

Despite the patriotic dig for victory rhetoric from Russia, replacing food imports banned by the government in response to western sanctions takes time and money.

Some banned products have found replacements from countries not affected by the ban but presumably there is a limit to how much this will provide particularly for products that have a long production cycle like beef.

While most ministers are saying we have it all sorted, we now have a supply of pig meat and we can make our own mozzarella, the Director from the economy department in the Ministry of Agriculture, Anatoli Kutsenko injected a bit more realism.

On Tuesday he told a conference that to replace imported foods the agricultural sector needed a massive budget allocation and "we'll be unable to solve the task to substantially increase production”.

According to Anatoli, to fully replace banned imported foods by 2020, Russian farmers would need at least 568bn roubles ($10.6bn) of government financed support.

To put that in context federal support for agricultural this year was 95bn roubles ($1.7bn).

Following Putin’s annual state-of-the nation address to parliament earlier today when he warned Russians of hard times ahead and urged self-reliance, it doesn't sound like anything near that amount if at all will be available.

Significant levels of support are unlikely to appear in the near future but I can see a situation when sanctions and import bans are lifted as the political landscape changes.

Which makes for a risky business plan if you hedging on supplying a market created by a political decision which could just as easily be reversed.