National Agenda : Growing It--and Going Nowhere : Russian farmers’ road to market runs afoul of chaotic distribution and organized criminals.

So fertile is the black earth in Russia’s southern breadbasket that farmers say if you plant a shovel, the handle will sprout leaves.

On the Shtukanev family farm, this makes for a lavish spread come dinner time: fresh chicken, potatoes, rice, bread, butter, spring dill, parsley and basil leaves, pickled tomatoes, eggplant, and, from the livestock, pure white sala , a thick hunk of salted pork fat that is considered a special delicacy here.

Every morsel--even the bottle of vodka brewed from local durham wheat--is grown by the familyon their 36-acre farm.

With a tractor, a harvester, few debts and higher yields than the collective farm he declared independence from two years ago, Vladimir G. Shtukanev, 34, is the very model of the entrepreneurial private farmer that Russian reformers envisioned.

But Shtukanev has one big problem: He has no buyer for the harvest bursting from his fields.

The Soviet state distribution system is moribund, and Russia has yet to replace it with a free market to transport, wholesale and retail food. Part of the problem is the endemic chaos that has plagued Russia’s transition to a rational economic system, a situation further aggravated by runaway inflation. But equally to blame is the so-called Russian mafia, which has fixed food prices in the big cities and, with threats and violence, prevents farmers from selling their produce cheaper.

“Grave obstacles have appeared in getting food to the consumer,” said Deputy Agriculture Minister Anatoly S. Kopylov in a recent interview. “One of the characteristics of this disorganized and chaotic market is its criminal nature.”

The Agriculture Ministry is so concerned that it is setting up 800 regional wholesale food markets to link buyers and sellers in a “civilized” way, Kopylov said.

As Russia lurches toward a free-market economy, nowhere have the changes been more jolting--and more bewildering--than down on the farm, where the fields are bountiful but the marketing is a nightmare.

On paper, at least, the transformation from the Communist command system looks sweeping. Russia now has 277,000 privately owned farms that are home to 1.5 million people and span 29 million acres of land.

More than 90% of the vast and notoriously inefficient collective farms have been turned into joint-stock companies in which workers have ownership and voting rights. Here in Krasnodar, more than 15% of these new agro-businesses have already voted to fire the old Communist Party bosses who once carried out Moscow’s commands, said Gennady G. Koltsev, the region’s deputy administrator.

“If the director loses the trust of his members, no local officials can save him,” Koltsev said. As the economic crunch deepens, some farms have ousted two directors in three months, he said.

Still, the 60-year legacy of collectivization cannot be dissolved by decree.

Gone is what leading Russian land reformer Yuri D. Chernichenko calls the “agro-gulag,” a system that kept collective farm workers from leaving their farms without permission and doomed them to decades of substandard housing, health and education.

But a host of complex, interrelated economic, organizational and psychological changes are needed before rural Russians can take advantage of their theoretical new freedoms:

* First, the 213% annual interest rate makes it impossible for most would-be private farmers to buy the equipment, fertilizer and seed needed to get started. Many who have borrowed money have simply gone broke. In 1993, 15,000 private farms went bankrupt, and the failure rate is accelerating, according to the Assn. of Russian Peasant Farms and Agricultural Cooperatives, or AKKOR.

In Krasnodar, a number of former collective farms are also insolvent, but so far local authorities--fearful that bankruptcy would mean unemployment for hundreds, if not thousands, ofworkers--have managed to bail them out.

* Second, the decision to free energy prices has created a severe oil shock in the farm belt. As once-subsidized energy prices approach world levels, farmers suddenly can no longer afford to fuel their diesel-guzzling tractors, sowers and harvesters.

Nor can they afford to purchase the cheap, petroleum-based fertilizers, herbicides and pesticides that they once lavished on their land. By early March, farms had only a third of the required fertilizer and half the pesticides needed to defend this year’s crop, according to government statistics. Environmentalists say this reduced use of chemicals is a blessing in disguise. But a meager harvest is nonetheless predicted.

* Third, prices for farm commodities are rising far more slowly than prices for industrial goods, a process that is fast eroding farmers’ purchasing power.

“Fuel prices are rising, but our prices are not,” complained private farmer Vladimir O. Melnik, who along with 22 others formed a marketing cooperative in the Krymsk region of western Krasnodar.

A liter of diesel fuel costs 10 times what it did last year, Melnik said, but the price of a pound of potatoes has not even doubled. In 1992, a Krasnodar farmer could earn enough from selling 30 tons of tomatoes to buy two tractors, he said; today, those tomatoes would cover only half the price of one tractor.

But what farmers complain of most bitterly is the lack of a safe, predictable market for their food.

“It really is scary, but despite the fact that the markets are empty, it’s still impossible to sell your produce” in Moscow, St. Petersburg and other large Russian cities, said Tatyana V. Vasilyeva, president of the local Krasnodar branch of AKKOR, which represents 16,680 private farmers. Highway robbers, traffic police who demand payola in exchange for free passage and payoffs to local gangsters make a mockery of a free market, she explained.

*

Vasilyeva told of farmers who drove a truck full of top-quality smoked ham to Moscow and tried to sell it for about $1.10 a pound--less than half the going rate in the capital.

Shops would only take the ham on consignment, with the money to be paid weeks or months later--once inflation has eroded its value.

“At the market, our farmers nearly got killed. The mafia would not allow them to sell it there,” Vasilyeva said, using the term mafia to mean anything from petty extortionists who rough up street merchants to the professional criminals known to enforce their demands with heavy firepower.

In desperation, the farmers drove their truck to the AKKOR headquarters in Moscow to ask for help--and sold their ham on the spot.

“This ham was literally snapped up in a couple of minutes,” Vasilyeva said. “People were buying as much as they could carry, because the price was ridiculously low. Still, none of the stores would take it.”

Melnik, the Krasnodar farmer, said his cooperative sent a truck of tomatoes to Moscow, but the farmers were stopped at the outskirts of the city, where racketeers together with corrupt traffic police insisted that the contents of the truck be handed over at rock-bottom prices.

*

“If you do get through, they tell you what price you can sell for, and no lower,” Melnik said. The complaints of beatings, threats and price-fixing have been repeated by farmers from Siberia to central Russia. So was Melnik’s conclusion: “It’s just not worth going to Moscow.”

Russian Interior Minister Viktor F. Yerin said such problems are exaggerated. At a news conference this month, Yerin said police have cracked down on highway banditry, arresting about a dozen gangs of truck hijackers in recent months.

But the minister also complained of the farmers’ own passivity. Police have offered to organize protected truck convoys but have not had any takers, he said.

Certainly, the residents of Krasnodar have little faith in their government. Last fall, the quasi-official state grain agency collected the autumn harvest from farmers--but did not pay some of them until April. By the time farmers and collectives got the money, inflation had reduced it to a joke. And many were left without the means to buy seeds and fuel.

The pro-Communist Agrarian Union and its allies immediately began predicting a disastrous harvest unless the government stopped slashing subsidies to agriculture. After a fierce lobbying campaign, Prime Minister Viktor S. Chernomyrdin released about $2.6 billion to help get the spring crop planted.

Come autumn, however, farmers will be anxious to find a grain buyer more reliable than the state.

“Some growers may be scared off,” said Deputy Agriculture Minister Kopylov. “That is why we are in a hurry to create a new and independent system” of regional wholesale markets, grain exchanges and even a futures market that will help create a more predictable market for grain.

In the meantime, private farmers and privatized collectives are quite literally living off their land. Barter is now more common than cash transactions. Farmers say they have swapped their produce for everything from TV sets to fuel.

Farmers speak with nostalgia of how much easier life was 10 years ago. While few say they would return to the unfulfilled promise of utopia under the Soviet system, nearly everyone is dismayed by the chaos that surrounds them.

When the Path to Communism collective farm was turned into a joint-stock company last year, its 2,500 workers quickly renamed it “Niva,” meaning field.

“That (communism) was a society that couldn’t exist, but we were supposedly heading for it,” said Vladimir A. Maluga, 36, who said he no longer believes in utopia.

But today, the farm that was once considered the best collective in Krasnodar is $13,000 in the red. Niva now earns cash by selling Turkish delight, a sunflower seed and sugar confection, in the local market. The farm has also swapped the sweet stuff for a load of construction materials and bartered its fruit for diesel fuel.

Earlier this year, farm workers, who had not been paid for months, were talking of taking their shares in Niva and splitting off as a private farm, Maluga said. Suddenly, the farm directors doubled their salaries, and their pay began to come regularly, he said.

But workers too are being held accountable for the results of their labor. When 12 calves died this winter, Niva’s director fined Maluga and three other supervisors almost twice their monthly salaries for having failed to quarantine the sick animals before the epidemic spread. Five of Maluga’s workers were sacked for showing up late, drunk or not at all.

*

Despite the harsh measures, Maluga said he would vote to keep Niva’s director in office.

“He’s a little cruel . . . but he’s an honest man,” the farmer said. He paused, then added approvingly: “And he knows how to count.”

Meanwhile, the Niva company is learning what not to plant. For decades, central planners in Moscow ordered the collective to grow hemp--but the free-market price turned out to be too low to make the crop worthwhile.

This year, Niva is planting soybeans for cattle feed. And the farm is abandoning the old Soviet practice of fattening cattle on once-subsidized but now-expensive grain.

With the Russian grain market so unstable, farmer Shtukanev has planted half his land with sunflowers. If the local plant that produces sunflower oil buys his seeds at a decent price, Shtukanev believes that he can pay off his debts this year.

“Growing it is a lot easier than selling it,” Shtukanev said. “You have to figure out how you’re going to sell your crops before you plant them. That’s the hardest part.”

A Bite Out of the Breadbasket

Food prices are skyrocketing in Russia, but farmers aren’t reaping the wealth. Middlemen skim off the profits while consumers and farmers suffer.

Average Russian monthly salary, as of April: $94.59 (175,000 rubles)

Current prices and percent increase since June, 1993 (in U.S. dollars):

Beet sugar (1 lb.): 0.14/353%

Bread (loaf of white): $0.26/746%

Eggs (per dozen): 0.93/684%

Flour (1 lb): 0.11/687%

Vodka (Russian, 1/2 liter): 1.31/284%

Sources: Russian State Statistics Committee, Moscow food markets

Sticker Shock at the Market

What if Americans had to pay as much for food as Russians, in relative terms? Bread would be about $5.25 a loaf and butter $17 a pound, based on a sample Russian weekly salary of $22 and a U.S. weekly salary of $445. Some comparisons:

Price at same % Item Actual price % of weekly of salary in Moscow salary in U.S. White cane sugar (1 lb.) $0.45 2.05 $9.12 Eggs (per dozen) 0.93 4.1 18.25 Flour (1 lb) 0.11 0.5 2.26 Vodka (Finnish Absolut, 1/2 liter) 7.50 34.1 151.75 Milk (liter) 0.38 1.73 7.70 Beef, cheapest available (1 lb.) 0.76 3.45 15.35 Beef, high quality (1 lb.) 2.33 10.59 47.13 Chicken (whole fresh, per pound) 1.16 5.27 23.45 Tomatoes (1 lb.) 1.05 4.77 21.23 Cucumbers (1 lb.) 1.16 5.27 23.45 Potatoes (1 lb) 0.17 0.77 3.43 Bananas (1 lb. ) 0.51 2.32 10.32 Cherries (1 lb.) 1.16 5.27 23.45 Oranges (1 lb.) 0.70 3.18 14.15

Sources: Russian State Statistics Committee, Moscow food markets, U.S. Bureau of Labor Statistics