Russia Copes With Crisis in Agriculture

In the slothful days of the Soviet Union, when state farms were the domain of drunks and dunces, Russia could never feed itself despite its vast expanses of chocolaty soil and a millennium-old agrarian tradition.

What was missing, mused the scholars and scribes who watched this country stagger under central planning, was that capitalist notion of individual incentive. Without the promise of personal profit, Ivan just couldn’t be bothered to tend those cows or nurture those crops.

But more than a decade into the new economic order that encourages Russians to get richer by working harder, agriculture is in its sorriest state since the starvation and chaos of the 1930s inflicted by dictator Josef Stalin’s brutal collectivization.

To an even greater degree than in Soviet times, Russians must grow their own produce on the tiny private gardening plots they lease from their towns and cities if they want to be sure of getting enough to eat.

And the outlook for better output from the decaying network of state farms and struggling private farming cooperatives is bleak because of the unresolved conflict between Kremlin reformers and their Communist opponents over whether individuals should be allowed to own land.

Growing Produce as Means of Survival

In what may be the last bastion of the Bolsheviks who sought to secure power by controlling the country’s food source, Communists have succeeded in fostering widespread fears of a private land market among today’s rural residents whose lives have only become more spartan in the capitalist era.

Russia’s draft Land Code has languished for more than three years in the Communist-controlled Duma, the lower house of parliament--hostage to fears that many who now making their living as farmers will lose their jobs if the land they work falls into private hands.

Those fiercely loyal to Communist doctrine are now a minority in Russia, but they retain a stranglehold on the countryside and are loath to give way to the market forces now driving most other aspects of the national economy.

Despite stunning growth in most consumer and service industries, food production is still in the clumsy hands of Communist ideologues and loses more ground each year to higher-quality imports and the output of private plots.

“People don’t feed themselves with what is sold in stores. These shops are only for that 1% of the country made up of rich New Russians,” says Yuri Chernichenko, president of the Peasants’ Party of Russia, which is author and primary advocate of the pending land reform. “Everyone grows his own food in this country. If they didn’t, they would starve.”

Weekend gardeners who tend small plots attached to their dachas in the countryside grow 91% of the potatoes consumed in Russia, 77% of all vegetables, 56% of meat and 47% of dairy products, notes Alexander Serkov, deputy director of the All-Russian Agriculture Research Institute.

In the Soviet era, Western critics often pointed to the greater output from private plots as evidence that incentive was what was lacking on the state farms, as the individual gardens then produced about 25% of Russia’s food while occupying less than 3% of its cultivated territory.

Today, agriculture officials contend reliable statistics are hard to come by but estimate that as much as 50% of the country’s food needs are supplied by the individual gardens that now cover 10% of the agricultural land.

Imported goods account for an additional 35% to 40% of food consumption in the country, says Vladimir Loginov, director of the Agriculture Ministry’s food market regulatory agency.

That means the surviving state farms and fledgling private agricultural co-ops are producing no more than 10% to 15% of the country’s food needs--a factor that worries those responsible for national security because it leaves Russia dependent on foreign suppliers for its most vital commodity: food.

Collapse of Collective Farms

At the Iskra state dairy farm in this village an hour’s drive from thriving Moscow, the disparity between shrinking collective output and the abundance from each family’s private plot is a convincing example.

“Everything my family eats comes from my kitchen garden,” says Lyudmila Khirova, the 38-year-old mother of four who runs one of Iskra’s five dairy barns. “We grow or raise everything ourselves, except melons.”

By contrast, the farm’s production has dropped every year since 1990, and the tough competition posed by imported milk products means Iskra must continue to divest land and assets to make ends meet. While average pay for the farmers is only about $240 a month, employees say they are often paid in commodities, such as meat and fodder, instead of cash.

Since its conversion to a workers’ collective in 1993, Iskra has shed a third of its territory to the regional government, which in turn has leased it out to wealthy Muscovites wanting sites for dachas far from the noise and pollution of the capital. The farm also has lost two-thirds of its original 1,500 milk cows, and jobs have dropped from 600 a decade ago to 230 today.

More than 50 million Russian citizens, or a third of this country’s population, live in rural communities where the only source of income is farming. While the vast majority worked on large state and collective farms in the Soviet era, the virtual collapse of those ill-managed and overstaffed enterprises compelled most of the agricultural work force to retreat to their homes and eke out an existence growing their own produce and tending a few head of cattle.

High Tariffs Inflate Price of Food

Disappearing jobs and prevalent barter trade have severely eroded Russians’ buying power and led to significant drops in food purchases in stores and supermarkets in recent years, says Stanislav Anisimov, president of the Roskontrakt food procurement and distribution service. His capitalist-style joint-stock company, built on the ruins of the Gossnab state supply monopoly of the Soviet era, focuses on securing sugar beets, sunflowers and grain for processing at Russian factories to boost self-reliance on the vital commodities that individual gardeners cannot make for themselves: sugar, cooking oil and flour.

Russia’s heavy dependence on imports also has allowed the cash-strapped government to slap on higher and higher duties to fill the treasury’s empty coffers. But those tariffs are criticized by consumers as a chief cause of rising food prices and by analysts as protectionism that encourages inefficiency in the domestic food industries. As of Aug. 1, a 3% surcharge has been added to all imports to generate revenue for the government.

“This latest increase in import duties will only raise the cost of food for consumers and reduce their ability to afford a proper diet,” grouses Vladimir Karnaukhov, commercial director of the successful Seventh Continent grocery store chain in the Moscow area.

Land Ownership Root of Problem

Like other entrepreneurs struggling to operate in Russia, Karnaukhov says he doubts that any recovery in Russian agriculture is possible before the country’s general finances are put in order.

Most pressing, however, observers say, is adoption of the Land Code and the establishment of clear property rights, including the right of banks to repossess farmland in the case of defaulted loans.

“The biggest problem we have in agriculture today is the lack of any guarantees for credit. No one owns property, and land is the only asset that can be mortgaged,” Anisimov says. “Until the issue of land ownership is resolved, the crisis in agriculture will continue.”

Farmers also face stiff competition for credit from the Russian government, whose strangling debt crisis forces the Kremlin to borrow heavily at high interest rates to pay off maturing short-term loans. Despite a $22.6-billion bailout promised by international lenders over the next 18 months, no one in Moscow is predicting the kind of financial stabilization needed to free resources for farming.

“Without land to use as collateral, a farmer can’t get the credit he needs to buy seeds, fertilizer or equipment,” says Anatoly Altukhov, an analyst at the agriculture research institute.

While the paralyzation of the Land Code is widely blamed for the crisis in Russia’s food production, those tilling the soil have been successfully convinced by their former Communist directors that private property will cost them their jobs.

“We are against this. A land law will only worsen conditions,” Iskra director Ivan Yanchukov prompts the farm’s equipment manager, Valentina Surova, when she is asked whether owning land that could be used as loan collateral might allow investment to upgrade their antiquated milking devices.

“Our Russian people wouldn’t know how to handle private property. They live only for today and would just sell their land rather than invest for the future,” Yanchukov interjects.

Although Soviet-era farms like Iskra have shrunk to mere remnants of their former size, directors still wield absolute power over the rural work force. Russians have no right, even in today’s market economy, to move out of the communities in which they are registered to seek job opportunities elsewhere, condemning those fired for crossing omnipotent bosses in one-industry backwaters like Poyarkovo to unemployment.

‘Easing the Fears of Private Property’

Chernichenko, the Peasants’ Party leader, says he believes the vital private land market will eventually develop in Russia but that several more years will be necessary to break down popular resistance inspired by Communists struggling to hold on to their last sphere of power.

“The Duma is like ‘Jurassic Park.’ All these reptiles are stomping around scaring everyone,” says the agrarian advocate. “But sooner or later, wisdom will prevail and people will realize they have nothing to fear from a land law.”

Some regional leaders have taken matters into their own hands and announced that land in their provinces is for sale to private farmers. The first to bolt from the federal logjam was the reformist governor of the Volga River region of Saratov, Dmitri Ayatskov, and 40 other provincial leaders have followed suit over the last year.

Proponents of private land ownership predict eventual adoption of the Land Code, but even the most optimistic forecasts see the reform no sooner than 2000, when Russia will have a new--and potentially more progressive--Duma and a successor to President Boris N. Yeltsin.

“Everyone knows the absence of property rights is impeding agricultural production, but the mentality of the country’s food growers changes much more slowly than do the political forces in the legislature,” says Loginov of the Agriculture Ministry. “It will likely take another decade to ease the fears of private property that have been spread in the countryside.”