Of Help For Russian Agriculture

The conditions today in Russia are favourable for development of agriculture. As import is getting more expensive, Russian agrarians have actual opportunity to make profit while selling their production inside the country. However, bad financing may prevent them from doing so: it is likely that not all agricultural producers had the opportunity to purchase necessary fertilizers. In this case, Russian government and mineral fertilizer producers will help the agriculture.

The Ministry of Agriculture predicted that grain harvest will be some 85–90 million tonnes this year. The result is less than that of the previous year, when the grain harvest reached the record figure of 108 million tonnes. Grain market experts believe that the yield decrease may become one of the consequences of the economic crisis. According to Oleg Sukhanov, an expert at the Institute for Agricultural Market Studies (IAMS), due to complicated financial situation that all farms faced last autumn, it is likely that the fertilizers they purchased are in fact less then necessary; surely, this may effect the yield this year. On the other hand, only now that the prices for import are seeing a dramatic growth, Russian agrarians have received a favourable opportunity to compete successfully with their foreign counterparts.

These trends are obvious for both officials and mineral fertilizer producers, who are trying to make mineral fertilizers affordable for the domestic agriculture. In October last year The Agro-Industrial Union of Russia and the Russian Association of Mineral Fertilizer Producers signed an agreement and fixed the amount of mineral fertilizers purchased by agricultural producers and the price formulas to be applied up to 2012. This agreement is intended to guarantee the required agrochemicals for consumers at a fixed price and secure firm domestic demand for the producers. Besides, in February this year Russian government abolished export duties for mineral fertilizers; in return, officials require that fertilizer companies provide for guaranteed supplies on the domestic market at acceptable prices.

According to the Ministry of Industry and Trade of the Russian Federation, owing to these steps, in January and February this year Russian mineral fertilizer producers’ domestic supplies increased by 33% compared to the same period last year, while the overall production of mineral fertilizers fell by 31%. In many cases, increased domestic supplies have also been driven by special programs by mineral fertilizer companies. The programs are mainly intended to provide an easier access to their products for agricultural producers. For instance, Akron and Rosselkhozbank are implementing a joint program to finance supplies of mineral fertilizers to enterprises in agribusiness industry. As part of this program, agrarians receive acceptance credit to purchase fertilizers from Akron sales network.

Another major producer of mineral fertilizers, Uralchem, is also working to create favourable conditions and effectively supply Russian agriculture with mineral fertilizers. Domestic market is a priority for the company. Dmitry Osipov, Chief Executive Officer of Uralchem, OJSC mentioned this. He said:”Domestic market is our priority. We are interested in its development and growth”.

The fact that the Company created its own Trading House URALCHEM is a good proof of what has been said. Key functions of the Trading House are to facilitate sales and promote the company’s products in Russia and the CIS. Aleksey Strakhov, General Director of Trading House Uralchem talked about the main reasons why the Trading House was created: “When operating a wide network of Trading House regional representative offices, URALCHEM will be closer to its consumers. The company will be able to develop and strengthen business cooperation with partners and clients in Russian regions and the CIS”.

The company has done a lot of work since Trading House URALCHEM was created. Agricultural producers in many Russian regions clearly see the results. URALCHEM’s products have become both more accessible and more affordable for the agricultural farms.

URALCHEM began by opening the first Agrochemical Centre of Trading House URALCHEM in Nizhniy Novgorod. This separate subdivision was intended to carry out direct supplies of mineral fertilizers to consumers in Nizhniy Novgorod region and neighboring territories: Vladimir region, Chuvash Republic, Republic of Mordovia and Republic of Mariy-El.

That time, Leonid Sedov, the Minister of Agriculture and Food Resources in Nizhniy Novgorod region noted that the Agrochemical Centre was very important for the region. Mr. Sedov said: “Agrochemical Centre is extremely important for agribusiness in the region. Local agricultural producers and their neighbors will now have an opportunity to obtain fertilizer requirements directly and promptly”.

Similar agrochemical centers will soon appear in all major Russian agricultural regions to achieve the principal goal — establish effective cooperation with agricultural producers. The work, however, will not be limited to supplying mineral fertilizers. Other services will include sale, storage, loading, delivery and application of mineral fertilizers and crop-protecting agents, agrochemical consultations on soil analysis, estimation of production costs, and development of mineral fertilizer application projects for farmers. The centers will also provide agrarians with agricultural equipment and accessories. Besides, Trading House URALCHEM will strengthen partner relations and improve cooperation with local government authorities, large agroindustrial holdings, farms and private entrepreneurs.

In particular, the work resulted, for example, in successful negotiations with the government of Tumen region on joint implementation of the program to supply agricultural producers in the region with over 30 thousand tonnes of URALCHEM mineral fertilizers. Local regional government will provide financing for the fertilizers by granting subsidies to the agrarians.

New distribution networks built by Trading House URALCHEM have already started supplying mineral fertilizers to a number of Russian regions. In particular, the company concluded agreements on guaranteed supplies of mineral fertilizers with non-profit organizations of Kurgan and Sverdlovsk regions. Under the effective agreements with Kurgan Region Agroindustrial Union and Sverdlovsk Region Agribusiness Sector Unions Association, both being non-profit organizations, Trading House URALCHEM undertakes to supply agricultural producers in Kurgan and Sverdlovsk regions with necessary amount of mineral fertilizers and at prices, set for each following month. According to Aleksey Strakhov, the agreements “are a planned step in order to develop and strengthen cooperation with partners and clients in Russian regions”. Earlier this year similar documents were signed with administrations of Kirov, Tumen and Perm regions. According to Mr. Strakhov, Trading House URALCHEM will continue the work to introduce a system for full supply of Russian agrarians in other regions with effective means of production.

URALCHEM secures guaranteed supplies of its production to Russian regions and makes the production affordable for consumers. The company is well-known for 10 to 20 percent discounts usually made for domestic consumers ahead of the spring planting. And it did so this year too. From the beginning of 2009 URALCHEM fixed the prices for key products sold in the domestic market for a half-year period. In addition, in February 2009 Trading House URALCHEM concluded an agreement with Perm region ministry of Agriculture. Under the agreement, fertilizers were supplied at 20% discount of regular market price. Government of the region highly appreciated this measure. According to Elena Gilyazova, the Minister of Agriculture in Perm Region, they “reached understanding with URALCHEM management” in what concerns necessity to create the most favourable conditions enabling agricultural producers in the region to prepare for spring planting.