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IKAR in Mass Media

In search of the margin

28 февраля 2011 года

"Where the margins" - under this name it was hold a regular international conference of agricultural producers and capital goods and services suppliers for the agricultural sector in February in Moscow. It is easy to notice the absence of natural question. It seems that the conference`s organizers from the Institute for Agricultural Market Studies (ICAR) have done so consciously, as they invited to true professionals, both domestic and foreign. They priori know the answer to the question: "Where?" and are ready to tell about it to farmers, packed the roomy hall of the hotel «Renaissance Moscow Monarch Center».

First of all let`s begin to understand what is the «margin». This term comes from the English margin - border (French marge). According to the "Modern economic dictionary" in banking, stock exchange, trad ing, insurance practice under the margin it is understood a difference between the interest rates, securities prices, goods prices and other similar homogeneous indicators, taking place in the same time in different conditions of sale, purchase , credit. By meaning the words «difference», «income» and «deposit» stand closer to the word margin.

But let`s back to the conference. I would like to mention a well considered and well coordinated event. The interesting and informative program gave an opportunity to handle a problem of agricultural production profitability, and also attendant industries in the field of processing and service on all hands. The subjects of continuously chang ing sessions were devoted to the influence of state, agro-food markets condition, pro viding with agricultural equipment, innova tion, investment in land and other agricultural assets, insurance and harvest forecasting, agricultural assets management.

Deputy Minister of Agriculture Sergey Korolev among many indicators mentioned the industry`s volume of financing - 125 billion rubles. And a special attention will be paid to the insurance (it is allocated 5 billion rubles for it that is twice as much than in last year) and to the melioration. The stronger drought, the higher incomes (margin) on farms, which implement melioration systems. It is provided loans interest rates financing for purchase and installation of equipment for the melioration.

The Deputy Minister considers that in the agriculture incomes depend on the market regulation, pricing conjuncture on various kinds of products, on the balance between crop and livestock sector. It will be realized 5, 5-6, 0 million tons of grain from the interven tional fund in order to maintain this balance. According to the view of S. Korolev, today the situation on the market is quite favorable. Agri cultural enterprises, not suffered from drought, such as in the Altai region, even receive super-profits. He said that it had been taken all necessary measures for normal functioning of the industry.

Head of Agricultural Economics Depart ment of Lomonosov Moscow State University Sergey Kiselev has been studying the issues of WTO 15 years. As he declared, there was not a common opinion concerning joining Russia the World Trade Organization even among his colleagues at the university and in other organizations. He is firmly sure that joining the WTO will not have a significant influence on the development of agriculture, which depends on domestic economic policy and internal ex change value of ruble. The fact is that the WTO limits not all measures of support. For example, costs for measures of so-called «green box / basket» are not limited at all.

These include: rural infrastructure, science, education, veterinary, plant quarantine, market information, consulting and inspection serv ices, payments for insurance, environmental protection, support for unfavorable agricultural areas, investment aid, tax breaks.

The Professor of the University of North Da kota (USA) Bill Wilson clearly showed how dy namic and changeable is a global agricultural market. It is influenced on it rapid development of soya market in China, Russian drought, use of biotechnology, in particular cultivation of ge netically modified plants, especially soya and corn, production of biofuel. According to the American professor, the wider is use of biotech crops in Russia, the easier is risk management.

Bill Wilson referred to "massive investment" in agriculture all over the world. The most at tractive is implementation of new technologies, seed production and logistics. In short, now it comes a good period for the industry. «America is far from us, but on its example we can see with what huge thing we have to interact and compete, » - General Director of ICAR Dmitry Rylko began his speech with this brief commentary. Indeed, investment only in development of the grain infrastructure in the U.S.A makes up $ 1 billion.

He described the situation in detail and forecasted development of grain, beef and dairy markets in our country. Telling about norm and rate of the margin, he noted the good prospects for grain producers in western Siberia, the average ones - in the Central Black Earth zone, and the difficult conditions in Volga and Ural. As the south of Russia economy has a very high potential. However, the specialists of ICAR pass an opinion, that the mentioned re alization of grain from the interventional fund will make the situation weekly predictable; it is pos sible formation of super reserve in the south.

It will be nowhere to put grain. It is in progress head of livestock reduction in PSE and small inefficient farms in the livestock sector. This is conditionally positive trend, since it is released space for high-tech enterprises. The first deputy chairman of OJSC «Ro sagroleasing» Alexey Skory emphasized on absence of information awareness among villagers. Probably, it was one of the reasons for techniques gathering in areas of respon sible storage (as of 2005, to the amount of 7.8 billion rubles). It was proposed several measures favoring realization: discount ing, delay of the first payment, low advance payments, unsecured loans, reduce of tariff rates on equipment insurance contracts up to 50%, technique facilities by the navigation systems. The Company ceases work with the operators. "We are interested in working directly with agricultural producers", - stated the representative of Rosagroleasing.

It will be revived MTS, but in a new forma tion - in the form of computer-technology companies that will become regional centers of concentration of technology and will operate on the principle of support manning. It is devel oped a program that stimulates the production of import equipment in Russia. Rosagroleasing is an instrument of state policy, helping to solve the problems of increased power consumption and process park backwardness, said A. Fast. According to the president of the Agri cultural dealers Association «Askhod» Pavel Repnikov, investment attractiveness is primarily related to the margin. After the financial crisis in 2009 the supply of import equipment fell by 5 times, the domestic one - by 2 times.

As concerns to agricultural engineering industry, in our country there are no national equipments for production of pip fruits. P. Rep nikov considers impossible 50% localization level of production of import equipment in order to recognize production as domestic. Delivery of component parts should make up 60-90%, otherwise component parts will have lower quality and be expensive. And it is not worth to ignore the general practice division of labor.

The interesting fact was noted by the participants of the conference: the second year running the Ukraine buys more import equip ment than Russia.

The manager of BEFL Vladislav Novoselov told about the structure of agricultural land. A considerable proportion of land belongs to the state, but it is a land of the northern territories, which is not suited to classical agriculture. A small part belongs to citizens. Legal entities` proportion of land increases. Now 10 mil lion hectares are due to legal entities, and 15 groups of companies and agricultural holdings own more than 3 million hectares of land. How ever, neither the state nor the large agricultural enterprises are able to attract considerable investment capital.

Chris Erickson, chief executive director of Soyatech (USA), believes that instability on financial markets effects on agricultural assets. Agricultural lands are not connected with exchanges, but it's a very interesting invest ment asset because with the population growth increases consumption, share of crops for production of biofuel. As a result, it is necessary to develop reserve lands.

So long as investment in Brazil was sus pended in connection with political instability, investors look attentively at Russia, CIS and Eastern Europe. According to the presented data, Russian agriculture needs in 100-150 billion U.S. Government is ready to provide only a small part, and foreign investors can eliminate the deficit. "There are investors, and they are hungry. It is necessary to arouse interest in them "- summarized C. Erickson.

Piter Bride from the European Bank for Reconstruction and Development (UK) be lieves that we shall be able to increase cost of land and make it marketable, if we use the best seed and apply pesticides in good time. It is also necessary to improve the legal envi ronment. Experience of Brazil may be useful in this issue, where in lending it is practiced receipts for guaranteeing future crops.

Sometimes the advance volume financing is so high that it exceeds an actual cost of raw materials. These programs attract huge loans - almost $ 5 billion The president of «Ambika Group» company Mikhail Orlov appealed farmers to become attractive for investors, to convince them of availability of investments and manage their investments skillfully. "Com municate! Show yourselves! And you will be known. Come on, guys! ", said Orlov. Over the past 10 years, M. Orlov with his partners invested in Russian agriculture about $ 2 bil lion. In the first place investors are interested in projects in the field of crop sector. They believe that it is necessary to learn to grow corn, and then to put expensive cow houses.

Russian farmers must more active par ticipate in law-making, lobby their interests in the government. "What do you want? What are the priorities of the government? Do you want to feed your people? Then open ports, build elevators. It is not clear ultimate aims of our economy in this sector, "- it is difficult not to agree with these words of Mikhail Orlov. The other speeches were not less interest ing. Unfortunately, the limited volume of the magazine doesn`t allow telling about all in detail. But you can always find necessary information.

... The word "margin" has another interpreta tion, less popular, common in aviation - "safety margin". It seems that our agricultural produc ers haven’t just it. Small farms continue to come to ruin. And as the last year showed, large companies are not also insured from default. In behind-the-scenes talk the representative of one of the major banks has confessed that risks are too large and unpredictable for granting a credit to agriculture. Therefore, preference is given to the food and process ing industry, as well as the largest vertically integrated agricultural holdings.

Is there such a sector, where risks are higher than in agriculture? Our question forced to think the bank employee. "I think that in drug trade. But there rates are others' - he said half-jokingly. Obviously time doesn’t yet come about which Henry Ford wrote in his book almost 100 years ago «My life, my accomplishments». If a farmer is held him self, it only proves how amazingly profitable is agriculture ... As soon as a farmer learns to look at himself as an industrialist, prices will fall so for agricultural products and incomes will rise so that everybody will be sufficient for food.

Source: perfectagro.ru  |  #WhereTheMarginIs   |  Comments: 0   Views: 4

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