Executive summary
Agricultural prices have risen sharply in the past two years. They are forecast to remain high in the medium term. Higher food prices are of concern to policy-makers as they affect consumers. On the other hand, they are a unique opportunity for farmers. Higher agricultural prices improve farmers’ incomes and foster investment in agriculture.
This is especially relevant for Kazakhstan, Russia, and Ukraine, the main agricultural producers in the CIS. Compared to other regions of the world, these three countries have a significant unrealized grain production potential. At least 13 million hectares of unused farm land – abandoned during transition – could be returned to production, with no major environmental cost. There are no policy measures restricting the return of this land to production.
The OECD-FAO Agricultural Outlook released in July 20071 forecasts that CIS countries will increase production of wheat and coarse grains to 159 million tons by 2016, a 7% increase compared to 2007, and increase their exports up to 35 million tons (+14%). This is a forecast, which is likely be revised shortly2.
The maximum potential grain production of these countries is estimated in this paper at 230 million tons. This theoretical figure waives all existing constraints limiting land use and yield improvements. It also implies world markets can absorb large exportable surpluses at sustained prices. This maximum potential estimate was computed for illustrative purposes only.
Foreword
Real production and export figures will be within these two scenarios and will depend on how policy-markers and investors succeed in pulling their act together to unleash the unrealized production potential of the region.
Ambitious government policies are vital, implying improved use of state budgets to deliver essential public goods and services to the agricultural sector. A supportive institutional and regulatory environment is mandatory to attract private investment at all levels of the food chain. To achieve that, improving policy dialogue between private stakeholders and policy-makers will be instrumental.
Areas of immediate attention for policy-makers include: refraining from export limitation measures, knowledge and human capital development, strengthening of credit systems and financial instruments, and land markets. A special feature of CIS agriculture is the emergence of large agroholdings which farm vast areas of land. The development of this business model in agriculture calls for the scrutiny of policy-makers, in view of potential social and environmental issues.
Massive investment will be needed in handling, storage and transportation infrastructures. Financial resources will have to be mobilized from both the public and private sectors.
This note was prepared by FAO to provide region-specific information on the unrealized grain production potential of Russia, Kazakhstan and Ukraine, the three main grain producing and exporting countries in the CIS. It also gives some indications on policy measures, areas for investment and issues for consideration in realizing this potential. The note is meant to inform the debates of the high-level conference convened by FAO and EBRD on 10 March 2008. It draws from the findings of an independent study on “Grain Potential and the Future Role of CIS Countries on World Grain Markets” commissioned by EBRD and FAO to IKAR, a Moscow-based analytical agency.
1. See http://www.oecd.org/dataoecd/6/10/38893266.pdf.
2. The next OECD-FAO Agricultural Outlook is expected to be released in May 2008. Grain production and export potential in CIS countries
source: 16 page PDF at FAO website 10mar2008
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