IFPRI Report

The Outlook for Russia's Food Economy

The transition to a market economy now taking place in Russia naturally has profound implications for the country's agriculture sector. In "Russia's Food Economy in Transition: Current Policy Issues and the Long-Term Outlook," 2020 Discussion Paper 18, Joachim von Braun, Eugenia Serova, Harm tho Seeth, and Olga Melyukhina examine what effect reforms are likely to have on Russia's ability to produce food and feed its people in the next decade.

Since the breakup of the Soviet Union, the main components of the central planning system have been dismantled. At present, Russian agriculture is in disarray, driven by a mixture of market and state forces. Though this discussion paper is part of IFPRI's 2020 Vision initiative, which seeks to develop an international consensus on how to meet future world food needs while reducing poverty and protecting the environment to the year 2020, its forecasts extend only to the year 2005, for longer-term projections are exceedingly difficult to make in Russia's volatile economic environment.

Economic restructuring has been accompanied by a fall in production of major food items--grain, potatoes, milk, and meat. Overall agricultural production dropped by 21 percent from 1991 to 1994. Household plots, which grow food largely for the household alone, account for an increasing share of production. As a result of price liberalization, reduced subsidies for food commodities, and declining incomes, meat consumption in Russia--traditionally considered an indicator of living standards--has fallen, in favor of greater consumption of bread and potatoes.

Future levels of food consumption and production depend on creating appropriate incentives for farmers and exploiting interregional trade opportunities within Russia. Little progress is being made in either area. Incentives remain weak because of ineffective price information systems and high transaction costs in the food system. Opportunities for interregional trade are unlikely to be exploited rapidly because infrastructure is inadequate, the marketing system is poorly developed, and food and agricultural policy is becoming increasingly fragmented as authority shifts from the central government to the regions.

Given limited information and rapidly changing conditions, the authors of the study present scenarios for consumption and production of important food groups at an aggregate level, based on simple, transparent assumptions. Consumption of meat and milk products is projected to continue to fall into the second half of the 1990s, rising to about its 1995 level by the year 2005. Consumption of cereals and potatoes is projected to rise to the year 2000 and then to fall to about its 1995 level by 2005. Projections of total grain production fall to the year 2000 and somewhat optimistically return to a 1995 level of 90 million metric tons by the year 2005.