Russian Grain Has Heat Stroke

The Chelyabinsk Region has always been seen as the principal grain donor of the Urals. Agricultural farms covered over and above regional requirements as well as supplied wheat and corn to the Sverdlovsk and Tyumen Regions, Yugra and Yamal. 

However, in the last three years the region has been overpowered by heat. According to the Chelyabinsk Ministry of Agriculture, in 2008 the local soil drought resulted in 1.6 million tons of grain instead of the target yield of 2 million tons. In 2009, the shortfall amounted to 600 thousand tons. The loss exceeded 1.5 billion rubles. However, the spring and summer of 2010 were especially merciless: crops were burnt out on almost 700 thousand hectares of land. The preliminary estimates show that more than 75% of the crop has been lost: farmers have realigned their target yield, reducing it from 2.5 million tons of grain to 600 thousand tons. The fodder procurement forecasts are also rather gloomy: the southern areas of the region have lost 80-90% of annual and perennial grasses. Thus, this year crops will hardly be enough to cover even local needs of the region. 

In spring 2010, agrarians increased their activity in application of new approaches. For example, they sowed forage crops in three stages. They divided seeds so that at least some plantings could be rained on. However, the tactics was not very successful: in May-June a number of districts of the Chelyabinsk Region had not more than 2 millimeters of precipitation. 

Agricultural enterprises cannot afford to buy special-purpose equipment for irrigation of lands - they do not have money. The low purchase prices for the crops of 2009 (2.5-3 thousand rubles per ton at the cost equal to 3-4 thousand) brought many farmers down to their marrowbones. "In 2008 we did manage to make both ends meet and remained at profit due to the selling prices. In 2009 we were at a loss; besides, half of the sowings was destroyed by wind and soil drought. This year we have spent more than 30 million rubles on sowing; we had to borrow 40% of this amount from the bank. We sowed more than 6 hectares and lost almost the whole crop during the drought. Now we have nothing to feed livestock with and the money must be returned", Mikhail Lomakin, Director of the Metiznoye Peasant Farm Enterprise, informed "RusBusinessNews". 

He states that even if they had the money to buy equipment, its purchasing and maintenance would increase substantially the cost of products. "The irrigation of 7-9 thousand hectares of land will make grain and feeding stuff more expensive than gold". However, there is a way how to save at least part of the plantings - the system of irrigated plots must be revived. "During the years of reforms, the entire land infrastructure was destroyed. To restore it, we need to plough up the land, sow perennial grass, buy irrigation equipment, pumping plants, and make an agreement with the Vodokanal, a water company, for water supply from ponds. It is very costly, and farmers will not be able to make it without help. These systems would help us to save about 20% of the crop, regardless of weather conditions ", M.Lomakin points out. 

In the conditions when there is no technological possibility to protect crops against drought, farmers could be supported by partially returned money invested in sowings. However, as it turned out, the Chelyabinsk Region has no system of crop insurance. The farm managers interviewed by "RusBusinessNews" unanimously declare that they are not ready to work with insurers. The first reason is bureaucracy: a huge number of documents must be prepared and submitted - farmers do not have time for this. Secondly, farmers do not have money to pay insurance premiums. The third reason is farmers' mistrust to insurance companies. 

The Press-Service of the Chelyabinsk Ministry of Agriculture confirmed to "RusBusinessNews" that the region has no operating system of crop insurance. In 2009, for example, about 10 million rubles was allocated from the federal and regional budgets to agricultural enterprises for subsidizing of insurance costs. However, none of the agricultural enterprises took an advantage of this instrument. "Due to constant increases in electricity tariffs and prices for other materials and equipment, farmers are short of disposable working capital. It is extremely difficult for farmers to take loans for insurance premiums, as in 2010 the selection criteria for borrowers and the lending terms became much stricter, ministry officials state. Another hindrance is lack of confidence in insurance companies on the part of farmers. As a rule, this mistrust is underpinned by the fact that insurers try to do their best to avoid payments when the insured event occurs. The spectacular example: one of the entrepreneurs was denied payments because there was no weather station near his farm ", officials of the Ministry of Agriculture say. 

Nevertheless, peasants admit that today financial losses are not as critical for them as shortfall in feeding stuff and grain. It is crops that determine whether livestock will survive winters. In many areas of the Chelyabinsk Region, farmers already do not have anything to feed their cows - there is almost no green grass; everything has been burnt out. By autumn the situation can have become disastrous. 

"We have 1.45 thousand heads of livestock, Ibragim Akhmetgaleev, the head of Preduralie LLP, says. - Out of 6.5 thousand grain and forage crops, almost everything has burnt out. We have lost about 17 million rubles. Now, we again need money: we will have to buy feeding stuff in neighboring regions. According to our estimates, it will cost 3 times as much as our own supplies. If the following year drought comes again, there will be no farms in the region; everybody will go broke".

If there is no feeding stuff, farmers will have to slaughter cattle. Livestock farms will dwindle, and people will be left without jobs and wages. Livestock must also be saved because the situation on dairy and meat markets depends on it. Even now experts say that the grain deficit can entail not only increased prices for flour and bread, but also fluctuations on the related food markets. 

The authorities of the Chelyabinsk Region, together with agrarians, are desperately looking for ways that will allow them procure fodder and support financially agricultural farms. The decision was made to use all the straw of this year crop as fodder as well as to start summer sowings of annual grasses in the area of more than 15 thousand hectares and to set up a regional fund of crop seeds for farms that have suffered from the drought. 

"We have agreed upon assistance in fodder procurement with the Sverdlovsk and Kurgan Regions, and applied to the federal government with a request for purchasing of 380 thousand tons of grain from the intervention fund ", officials of the Regional Ministry of Agriculture pointed out. The neighboring regions are ready to sell another 400 thousand feeder grain and bread grain to the Chelyabinsk Region. 

M.Lomakin said that earlier, farmers asked to allocate funds from the regional treasury in the amount of 1 thousand rubles for each sown hectare of land and 1 thousand rubles for each head of the livestock in farms. On July 7, it was announced that Mikhail Yurevich, the Governor of the Chelyabinsk Region, signed the order about the lump-sum allowance in the amount of 144 million rubles to be given to farmers to compensate for their losses. In addition, the Chelyabinsk government addressed the Federal Ministry of Agriculture with a proposal to extend bank loans and leasing payments of farmers for 3 years. However, probably, the most fundamental support given to the Chelyabinsk farmers was the application of the regional authorities to the country's government for granting of an interest-free loan in the amount of 4 billion rubles.

In the next few days, Premier Vladimir Putin will consider strategies to support the regions that were hit by the drought. However, it is difficult to say when the money and grain will reach the entities of the Russian Federation. The country's authorities stay calm, cool and collected. "Even if the production goes down, we will be able to satisfy in full the domestic demand for grain and retain the export potential ", Elena Skrynnik, the Minister of Agriculture, declared at the meeting of the Presidium of the RF Government on July 5th in 2010. The next day, the Chelyabinsk authorities informed that the number of areas, where the state of emergency was introduced due to the drought, increased from 7 to 9.