Russian agricultural exports to focus on premium products

Russia needs to increase its agricultural exports by 1.5 times just  to get back to the financial level of 2021 l, of $55 billion, by 2030. This was announced by Russian President Vladimir Putin in his February address to the Federation Council. However, keeping the same  approach as now to supply chain management will  stop  this goal from being met.
By 2025-2026, exports from the agro-industrial complex (AIC) will reach a plateau of approximately $50 billion. However, if the requisite structural changes are implemented, it will be feasible to reach a volume of $65-70 billion by 2030.
The study, entitled "Ambitious, but Solvable: how Russia can increase agricultural exports to $70 billion", was conducted by the consulting company Yakov & Partners and is worth reading.
There has been a notable increase in exports from the domestic agro-industrial complex over the past few years. Russia is now  the sixth largest food supplier in the world by tonnage. However, to date, the expansion of these volumes has been driven primarily by the supply of realtively inexpensive grain crops.

The Analysts at Yakov & Partners have assessed the current portfolio of the agro-industrial complex and identified export growth potential of just $8–10 billion. If the current product portfolio is maintained, access to modern technologies is limited, and support for private investment is reduced, Russian agricultural product exports to global markets will reach a plateau by 2025–2026, failing to reach the $50 billion mark.
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The study's authors also calculate that the Russian agro-industrial complex is capable of increasing annual exports of products by $25–30 billion to $65–70 billion by 2030. This will require a focus on premium products such as animal proteins, feed bases, and vegtable based -based oils such as soy,rapeseed and sunflower.
To facilitate further growth of exports in monetary terms, it is essential to modify the structure by increasing the proportion of products with higher added value. "This, in turn, means modifying the crop rotation structure in Russia to favour forage crops," states one of the document's co-authors and Yakov and Partners director, Alexey Kletsko.

The study indicates that an increase in wheat export volumes by 25-30 million tons will result in a growth of agricultural exports in monetary terms by $7-8 billion per year. Similarly, an increase in the supply of three feed bases, including meal by 10 million tons, barley by 5 milliontons and corn by 3 million tons, will yield the same benefit.

An additional $5-6 billion can be made  by increasing the supply of vegetable oils by 5-6 million tons, including sunflower, soybean, and rapeseed. An additional $4-5 billion is projected to be generated by increasing the export of animal proteins, specifically poultry and pork, by 1 million tons each. The remaining $2-3 billion can be generated by increasing the supply of dry milk (by 2 million tons), flour (by 1 million tons), confectionery and other B2C products.

It should be noted that the growth of fish and seafood exports in the near future will be constrained by fishing quotas, as well as by deep-processing products and lack of competitiveness in the cattle meat sector is also a contributing factor.

The study outlines the key challenges and opportunities that must be addressed to facilitate a structural transition towards a more premium-focused export portfolio. One of the key objectives is to drive growth in the gross harvest of the main grain crops by 50-60 million tons, driven by an expansion in the area of arable land and a 15-42% increase in yield. Another key objective is to modify the structure of crop rotation in the country, with a focus on forage crops.
Furthermore, it is essential to achieve a reduction in the total cost of agricultural products from the point of origin to the port of destination. Furthermore, it is essential to achieve a reduction to a level that is comparable to, and lower than, the indicators of the main competitor countries.

Expanding sales markets
The authors consider the removal of administrative barriers to access target markets to be the most challenging aspect of this process. This involves addressing quotas, duties and unmotivated sanitary restrictions imposed by regulators in importing countries.

Analysts have identified China, the Middle East and North Africa, Southeast Asia and India as key regions for the development of domestic agricultural exports.

The CIS market is already approaching saturation point with Russian agricultural products. Latin America is the largest supplier of agricultural products to the global market, while exports to North America, Europe and other regions are constrained by political factors. For these reasons, China, the Middle East and North Africa, Southeast Asia, India and, to a lesser extent, sub-Saharan Africa should be identified as key regions for the development of Russian agricultural exports, according to Sergei Pavlov, director of Yakov and Partners.
He references data indicating that China imports agricultural products valued at over $186 billion annually, with Russia's current share standing at a mere 3%.

Mr. Pavlov attributes this discrepancy to the fact that Russia exports few agricultural products that are in demand in China, primarily feed bases, animal proteins, and dairy products.

Attractiveness and interaction
The authors of the study identify increased investment attractiveness of the agro-industrial complex as the key to increasing export deliveries. The authors of the study emphasise the importance of creating "national champions"—large national companies capable of consolidating large volumes of products and leveraging the benefits of scale in production, logistics, and marketing. Currently, the leading companies in the Russian agro-industrial complex are significantly smaller than their global counterparts.
That said It is not without reason that the Western media have been reporting in recent years that Russia has transformed its agro-industrial complex into almost a branch of the Ministry of Defence and that Russian agricultural exports represent a formidable "silent weapon" in its arsenal.
Russia is the global leader in the export of wheat, barley, maize, sunflower and rapeseed oil, and frozen fish. For example, one in five loaves of bread in the world is of Russian origin. The list of countries purchasing our food continues to expand on an annual basis. This year, Russia is supplying food to 160 countries, and even North America is continuing to purchase our wheat despite the current situation. The number of countries purchasing Russian wheat has increased from 57 to 67 over the past year.
This places us in a position to displace another competitor. For example, the market is witnessing a notable decline in the share of wheat from Argentina and Australia, with whom Russia previously engaged in intense competition. It appears that we were unable to maintain our previous level of performance.
In North Africa, Russia has displaced European wheat, mainly French, from markets in Egypt, Tunisia, Algeria and Morocco. This has resulted in a decline in French exports from nine million tonnes to 5.6 million tonnes over the year.

The structure of the 'national champion' is a topic worthy of further discussion. While it is clear that corporations currently dominate global trade in agricultural products, there are cooperatives with revenues in the billions of US dollars, and in the past, large state structures in the marketing board format have been highly successful in addressing export development challenges.
So despite its successes over the years there is still work to do in the Russian agricultura; sector