THE GEOGRAPHY OF CRISIS IN RUSSIA’S AGRICULTURE Grigory Ioffe Radford University and Tatyana Nefedova Institute of Geography, Russian Academy of Sciences The National Council for Eurasian and East European Research 910 17th Street, N.W. Suite 300 Washington, D.C. 20006 TITLE VIII PROGRAM Project Information* Principal Investigator: Grigory Ioffe Council Contract Number: 815-7g Date: May 23, 2000 Copyright Information Scholars retain the copyright on works they submit to NCEEER. However, NCEEER possesses the right to duplicate and disseminate such products, in written and electronic form, as follows: (a) for its internal use; (b) to the U.S. Government for its internal use or for dissemination to officials of foreign governments; and (c) for dissemination in accordance with the Freedom of Information Act or other law or policy of the U.S. government that grants the public access to documents held by the U.S. government. Additionally, NCEEER has a royalty-free license to distribute and disseminate papers submitted under the terms of its agreements to the general public, in furtherance of academic research, scholarship, and the advancement of general knowledge, on a non-profit basis. All papers distributed or disseminated shall bear notice of copyright. Neither NCEEER, nor the U.S. Government, nor any recipient of a Contract product may use it for commercial sale. * The work leading to this report was supported in part by contract or grant funds provided by the National Council for Eurasian and East European Research, funds which were made available by the U.S. Department of State under Title VIII (The Soviet-East European Research and Training Act of 1983, as amended). The analysis and interpretations contained herein are those of the author. ii Executive summary This article is an attempt to identify the causes of spatial variation in changes in Russia’s agricultural output during the 1990s. It begins by reviewing changes in crop farming and animal husbandry in Russia’s regions over this period, and then considers the importance of the two primary spatial factors that affect agricultural production: natural fertility of the soil and accessibility to major urban centers. The article ends with a discussion of the relative importance of such spatial factors compared to aspatial factors – such as all-Russian market reforms – in determining changes in agricultural performance. iii This article analyzes spatial changes in Russia’s agricultural output over the course of the 1990s. Most conclusions have been drawn from 1990-1997 regionally structured data, although the data actually probed occasionally extend beyond this time frame. At the time of this writing, the 1999 regionally structured records were not yet available, but the 1998 records reflected a crop failure of the magnitude that usually occurs only once in 40 years. The regional pattern of this crop failure is erratic and warrants a separate article. On the other hand, the 1999 evidence that we do have, however fragmented, reaffirms the 1990-1997 changes. Although a self-contained publication, this article is the second in a series reflecting our collaborative work on a project, entitled “Vertical Integration in the Russian Food System.”1 In our first publication we made the point that, in the overall amount of spatial variance that characterizes Russia’s agricultural output, two factors matter most: natural fertility of the soil and accessibility to major urban centers. These variables were construed as two components of economic rent as it affects Russian agriculture – in other words, two major components of its differential. This article is an attempt at explicit comparative analysis of the said aspects of economic rent as they affected agricultural output in Russia during the 1990s. We first review spatial changes in crop farming and animal husbandry without regard to underlying factors and then offer our partial geographic interpretation that involves soil fertility and urbanization. A discussion follows in which we attempt to relate spatial and aspatial factors of change in Russian agriculture. Monitoring change In 1997, Russia’s agricultural output was 36% below that of 1990, while the output of collective enterprises alone halved, as did the percentage share of agriculture in Russia’s GDP (Selskoye, 1998, p. 32). It became clear that the majority of former collective and state farms accustomed to state subsidies 1 The entire project is funded by the National Council for Eurasian and East European Research. 1 and state procurement quotas had not succeeded in the new market environment. To make matters worse, state investment in agriculture plunged from 16% of the total in 1991 to 2.5% in 1997 (Table 1). The drastic overhaul of prices and shrinking working capital have also hurt farming. In all regions, prices of agricultural inputs of industrial origin grew faster than prices of agricultural products. In most regions the excess was fivefold or more (Sotsial’no-Ekonomicheskoye, 1998). Some economists attributed this growing imbalance to the fact that under the Soviets the input/output price ratio was artificially skewed in favor of farming. So, when state control over prices and many of the subsidies were removed, this ratio abruptly approached that observed in the global economy (Serova and Yanbykh, 1998), whereas a compensating upward swing in food prices was constrained by the low buying power of Russian consumers. Crisis in large-scale commercial farming encouraged Russian villagers and most small- and medium-town folk to switch to self-production of food. Even in Russia’s largest cities the percentage share of food produced at suburban dachas has substantially increased. However, this change has been conditioned not only by inflation, but also by the unleashing of people’s pent-up preferences. As was pointed out elsewhere, many Russian urbanites are actually villagers in transition (Ioffe, 2000) who have not lost their skills in working the land and for whom storing food for winter comes from deeply ingrained habits, and not from economic necessity alone. When draconian Soviet-style restrictions on buying and leasing land were removed, many urbanites took advantage of opportunities to acquire the use of rural land and began to flock to traditional rural villages during summer. While some were thereby rescuing themselves from unemployment and lack of money, others were just engaging in a long- cherished activity. 2 Table 1. 1990-1998 Dynamics of Russian Agriculture Indicator 1990 1993 1995 1996 1997 1998 1999 Agriculture’s % share in the GDP 16.4 8.0 7.9 7.5 7.1 6.0 No Data Agriculture’s % share of domestic investment 15.9 7.9 3.5 2.9 2.5 3.3 No Data Percentage share of unprofitable socialized farms No data 10 55 76 78 No Data No Data Percentage share of subsidiary farming in the total 26 40 48 49 51 57 No Data agricultural output Output as a % share of that in 1990: All farms 100 83 67 63 64 57 59 Ditto: Socialized farms 100 68 49 44 45 38 No Data Ditto: Subsidiary farms 100 121 119 119 118 113 No Data Land under cultivation in millions of hectares: Total 117.7 111.8 102.5 99.6 91.6 81.2 87.4 Grains 63.0 60.9 54.7 53.4 53.6 50.7 46.8 Industrial crops 6.1 5.5 6.5 6.0 5.4 5.9 No Data Potatoes and vegetables 4.0 4.4 4.3 4.3 4.3 4.1 4.1 Grain output in million tons 89.1 99.1 63.4 69.3 88.6 47.9 54.7 Sugar beet output in million tons 24.3 25.5 19.1 16.2 13.9 10.8 15.2 Potato output in million tons 34.3 37.7 39.9 38.7 37.0 31.4 4.2 Vegetable output in million tons 11.2 9.8 11.3 10.7 11.1 10.5 31.2 Production of meat (cattle for slaughter) in million tons 10.1 7.5 5.8 5.3 4.9 4.6 4.3 Production of milk in million tons 55.7 46.5 39.2 35.8 34.1 33.3 32.1 Grain yield in centners per hectare 15.3 16.3 11.6 12.9 16.5 9.4 No Data Milk yield per cow 2781 2252 2007 1950 2061 2233 2284 Head of cattle in millions 58.8 52.2 43.3 39.7 35.1 31.5 28.5 Head of pigs in millions 40.0 31.5 24.9 22.6 19.1 17.3 17.2 Production of fertilizers in million tons 16.0 9.9 9.6 9.1 9.5 9.3 11.4 Application of fertilizers in kilos per hectare 88 46 17 17 18 16 No Data Production of tractors in thousands 214 89 21 14 12 No Data 15 Sources: Selskoye Khoziaistvo v Rossii, Moscow: Goskomstat 1998; Rossiya v Tsifrakh, Moscow: Goskomstat 1999; Serova, 20 3 All in all, this “urban flight” triggered an increase in the output of household or subsidiary farming, a clearly compensatory change vis-à-vis what happened to the output of collective farms (Table 1). This change thus has not only meant survival for individuals, but also has aided Russian agriculture in general, since its overall production has not shrunk as dramatically as that of industry. The share of subsidiary farming in Russia’s agricultural production skyrocketed from 26% in 1990 to 57% in 1999 (Table 1). And because the urbanites’ contribution to the overall output is grossly under-reported by Russian statistics, the actual share of household/subsidiary farming may be even higher than this. For a long time it was generally believed that most of subsidiary production consisted of what Russian villagers and small-town folks grew in their backyards, which in 1989-97 accounted for 2-5% of Russia’s agricultural land.