Publication: Monitor Volume: 4 Issue: 137

Specialists are predicting that more than one-third of this year’s harvest in Russia will be lost due to bad weather conditions. A late spring was followed by a severe drought that began in April and deepened by June, affecting thirty-five regions and devastating 20 percent of the sown area, especially in the Volga. The projected harvest may be only 60 million tons of grain, compared to last year’s bumper crop of 89 million tons, which was up from the 68 million tons of 1996. (Kommersant-daily, June 16)

The results of the drought will not be catastrophic, however. Last year’s harvest led some to hope that Russia could resume its historical role as a grain exporter. Even this year’s poor harvest should be nearly sufficient to meet domestic demand, which runs at about 60-65 million tons per year. Russia will thus need to import only perhaps 1 to 2 million tons of grain. The main effect of the drought will be to push up prices, which have fallen steadily in recent years. The grain price may go up from the current 700 rubles/ton to 1,000 rubles/ton by September. In any case, poor world market conditions last year meant that only 2.5 million tons of Russian grain was exported. The weak prices encouraged farms to cut back on sown acreage this year (to a record low of 51 million hectares), which worsened the impact of the drought this year.

The real problems in Russian agriculture, however, are to be found in the meat and dairy sectors, which fell by 10 percent and 5 percent respectively last year. Stocks of cattle, sheep and chickens are now one-quarter of the level they were in 1990. The financial situation in the sector is dire: Even last year, with the bumper grain crop, farms ran up losses of 25 billion rubles (US$4 billion). The farm lobby will use the excuse of the drought to try to extract subsidies from the federal budget, but knowing that the cupboard is bare they are more likely to succeed if they push for more protection from imports. The government already announced that it will introduce temporary tariffs of 40-70 percent on imported sugar from August 1.