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Economy: Poor Russian Harvest -- A Recurring Nightmare?

It appears that Russia will need outside help again because of a poor grain harvest this year. Often, the cause of such shortfalls is attributed to adverse weather -- cold springs, rainy summers. But as RFE/RL's Andrew F. Tully reports, the real reason may be the way the government in Moscow handles the Russian economy.

Washington, 17 July 2000 (RFE/RL) - Experts say Russia's grain harvest this year will probably fall far short of the government's goals.

Last month, the Ministry of Agriculture in Moscow estimated that the harvest will amount to 65 million tons of grain. But Gennady Kulik, a former vice premier in charge of agriculture, told the news agency Interfax that he estimates the total to be no greater than 52 million tons.

Kulik, now a member of the state Duma, the lower house of Russia's parliament, says Russia will need food aid amounting to about 10 million tons of grain.

In Washington, the U.S. Department of Agriculture (USDA) agrees that Russia will have a shortfall.

Mark Lindeman, of the USDA's Division of Production Estimates and Crop Assessment, says Russia consumes between 70 million and 75 million tons of grain a year. Therefore, he says, even if the nation's harvesting goals were met, it would still need to import as much as 10 million tons of grain, just as it did after the collapse of the ruble in 1988.

Lindeman notes that Russia's grain needs are far less than they were about a decade ago, shortly after the breakup of the Soviet Union. He says the overall decline in the country's economy means that Russians cannot afford to buy as much meat as they once could. Lindeman says this has led to a 50 percent decline in livestock inventories -- and thus less need for feed grain.

The USDA official told RFE/RL that many people mistakenly blame adverse weather for Russia's frequent failures to meet its goals for grain harvests. Lindeman explains that Russia is a large country with diverse weather. Therefore, he says, bad weather for grain in one area is usually offset by ideal weather in others and average weather elsewhere.

Lindeman explains that the primary reason that Russia often falls short of its grain-harvest goals is poor agricultural practices. And what grain they do harvest is more suitable for feeding to livestock than to people.

"They've had problems with quality over the last few years, you know, using poor quality seed, inadequate plant-protection chemicals and lower fertilizer applications, so all of this contributes to reductions in quality."

Lindeman concedes that he is not an economist, but he stresses that the economics of agriculture in Russia are not complex: When general purchasing power declines, farmers make less money and therefore they cannot afford to produce crops efficiently.

"Farms don't have any money. You know, they just can't purchase fertilizers, you know. Ten years ago -- at the height of what they called their 'intensive technology period,' which is essentially just Western farming practices -- there were plenty of supplies of fertilizers and pesticides. So that has all dropped off in the past 10 years because the farms have no money."

Daniel Griswold is a specialist in agricultural and trade issues at the Cato Institute, a Washington think tank. He says Russia faces two problems in overall farm production. One is internal and one is external.

Griswold told RFE/RL that the internal problem has to do with how Russians address land ownership -- even a full decade after the breakup of the Soviet Union. The USDA notes that about 90 percent of Russia's agricultural lands are owned by the state.

"They still haven't developed a system of private land ownership, transfer and property rights that are necessary for a truly productive, modern agricultural sector."

He says the external problem is that agriculture in Russia is still heavily protected and subsidized by the government. The economist notes that Russia imposes tariffs of about 40 percent on agricultural imports, and that government subsidies for farmers have actually been growing in recent years.

Griswold suggests that Russia's best strategy could be to diversify its economy.

"Maybe what they need to do is open up their economy and create a better investment climate so that they can transfer some of their resources out of agriculture and into manufacturing and other sectors of the economy."

Griswold says the key to any diversification is to attract foreign investors.

"They really need to have a fully open economy hospitable to foreign investment so they can accelerate the transition from agriculture to more modern industry."

Until then, Griswold says, Russia can expect more bad harvests and further stagnation of its economy.