Food provision strategy of Russia is in need of improvement / Продовольственная стратегия России нуждается в совершенствовании

Горбатенко Светлана Александровна кандидат технических наук доцент, кафедра техносферной безопасности, Курский институт социального образования (филиал), Российский государственный социальный университет 305021, Россия, Курская область, г. Курск, ул. Карла Маркса, 53 Gorbatenko Svetlana Aleksandrovna PhD in Technical Science associate professor of the Department of Technospheric Security at Kursk Institute of Social Education, branch of the Russian State Social University 305021, Russia, Kursk Region, Kursk, str. Karla Marksa, 53 kursk@rgsu.net Другие публикации этого автора     Комов Виктор Григорьевич доктор экономических наук доцент, кафедра социального менеджмента, экономики и социального права, Курский институт социального образования (филиал), Российский государственный социальный университет 305047, Россия, Курская область, г. Курск, ул. Комарова, 15, кв. 87 Komov Viktor Grigor'evich Doctor of Economics associate professor of the Department of Social Management, Economics and Social Law at Kursk Institute of Social Education, branch of the Russian State Social University 305047, Russia, Kursk Region, Kursk, str. Komarova, 15, ap. 87 komov31@bk.ru Другие публикации этого автора

Свиридов Вячеслав Иванович доктор сельскохозяйственных наук профессор, кафедра государственного управления, гражданского и уголовного права, Курский институт социального образования (филиал), Российский государственный социальный университет 305014, Россия, Курская область, г. Курск, ул. Шпайерская, 12 Sviridov Vyacheslav Ivanovich Doctor of Agriculture professor of the Department of State Management, Civil Law and Criminal Law at Kursk Institute of Social Education, branch of the Russian State Social University 305014, Russia, Kursk Region, Kursk, str. Shpaierskaya, 12 kafdmu@yandex.ru Другие публикации этого автора

An integral part of national security of a country is its food security, which primarily relies on the potential of the agricultural production. It is no accident that in the economically developed countries production and processing of food products is viewed as one of the key components of political stability, and serves as an index of state independence, and thus being accordingly regulated based on an existing strategy ^{[15, 10]}.

In the opinions of T. I. Gulyaeva, O. V. Sidorenko, V. V. Smirnova and other scientists, the principal elements of food strategy should be the following:
- Physical access to food products – presence of required amount and assortment of food products throughout the country in correspondence with the established norms of consumption;
- Affordability of food – level of income that would allow purchasing sufficient amount of food products to meet at least the minimum consumption level;
- Food safety for consumers, prevention of manufacturing and sales of substandard food products that could be harmful to the health of the population.

In Russia, none of the aforementioned components is fully implemented. Moreover, the actual consumption of absolutely all types of food products does not correspond with the scientifically proven norms (Table 1).

Table 1. Annual consumption of main food products in Russia per capita in kilograms.

The consumption of the more nutritious and higher value products (meat, dairy, eggs, etc.) is substantially lower than the set norms, while the consumption of the fairly inexpensive types of food exceeds the set norms. These circumstances testify not only to the physical, but also financial inaccessibility of separate types of food products, which has a negative effect on the quality longevity of people’s lives. Compared to the economically developed countries, the average life span of Russians is 8-10 years lower, and this is a threat to the national security, especially considering the growing healthcare costs.

The situation is further aggravated by the worsening of the food quality in the country. The quality of food was not high in pre-crisis period (Table 2), but after the introduction of sanctions by the European Union and the United States, as well as the food embargo by Russia, the situation becomes critical. This is substantiated by the fact that the food producers concentrated on the quantitative import replacement, relaxing the quality standards. A good example is the situation with the “Cheese and cheese products” food category.

Table 2. Results of the food quality inspection of separate food products sold in the city of Kurst (2015) ^{[8, p. 15]}.

After Russia’s deployment of anti-sanction measures, manufacturing of these products has increased in the 2014 and 2015 on average by about 26-28%, while the dairy resources diminished due to the decrease of its import by 2.5 times.This can only happen by use of substitutes, and the 25.8% increase in import of palm oil during this period is a good confirmation. But in the January and February of 2016 we can see a decrease in production of cheeses compared to the corresponding period in 2015, due to the drop in consumer demand for these products after confirming that it is subpar and overpriced. Even the tricks of disguising domestic products by English-language packaging did not help the manufacturers.

The import of food in 2015 continued to decrease. Compared to 2014, import of poultry decreased by 44.2%, fish by 38.3%, cheese and quark by 36.5%, and butter by 29.5%.As a result, the quality of food has worsened, since prior to sanctions the imported food comprised approximately a third of the retail sales (Image 1).

Image 1. The portion of imported food sales in Russia in %

The increase in production of farm products in 2015 by 3% compared to the previous year did not provide a significant effect upon the betterment of food provision, as in the years prior the annual growth rate was higher. In 2013 the production increase of farm products consisted of 5.8%, and overall production for the period between 2000 and 2013 had a growth rate of about 3.6%.

Therefore, after enactment of the anti-sanction measures, the growth rate of agricultural production did not increase, and even decreased, which testifies to the low effectiveness of the anti-sanction policy of the government and the need for its adjustment. This is also confirmed by the fact that the market reacted to the embargo with a spike in consumer prices ^[18]. In 2014 food inflation amounted to 15.4%, and in 2015 it reached 19.1%. Such rates could be considered unprecedented and they directly relate to the decrease in import products, as well as the forced necessity to change suppliers.

The current situation consists in the fact that the retailers demand cheap products from the manufacturers, as the actual income of the population decreased by 9.5% in 2015, while a number of Russian citizens with income below the minimum cost of living increased over the year by 3 million, and exceeded 19 million people in total. In such circumstances the manufacturers are forced to seek out cheaper ingredients or change the recipe altogether. For example,dairy protein and fat is being substituted with vegetable – palm or coconut; the food grains are replaced with forage; to increase the weight of chicken breast fillets, they are filled with a gel consisting of salt water and additives, etc.

The appeasement ofpolitical conjecture cannot take place at a cost of the population’s food quality, welfare, and living standard. Thus there is an objective need to make changes in the food strategy.

We are namely talking about abolishment of the food embargo. In the conditions of shortage and drastic price increases on many food products, the embargo on the import has caused the decrease in quality of food and a drop in the living standards of the population.

By our estimate, in 2015 Russian citizens spent 43-45% of their income on food. This is the same level as in Cameroon and Nigeria, while an average American spends only 6.5% of their income on food if eating at home, and combined with food expenses outside of home(restaurants) totals to 11%.At the same time, we need to consider the fact that the high percentage of food expenses goes hand in hand with malnutrition.

The low efficiency of Russian embargo is also confirmed by the fact that along with other circumstances, it caused a 3.7% GDP drop, while the EU countries and the U. S., at which these anti-sanctions were aimed, had an increase in their GDP of 1.3% and 2.1% respectively.Without the “battle” of sanctions the consequences of the drop in oil price would not be as severe.

An important role in improvement of food provision in the country belongs to a smart agrarian policy with a clear set of main priorities.Now more than ever it would be relevant to create new work places in suburbs and rural areas, but the efforts of the authorities are predominantly aimed at finding new food exporters, while rural unemployment according to studies ^{[9, p. 56]} is at no less than 32%. On the vast rural territories millions of people are unemployed, and it is one of the main causes of food shortages in the nation.

The situation is worsened by the fact that currently the priority development goes to agribusinesses that own hundreds of thousands of hectares of land.They are well equipped and do not need the Russian population, just as they have no relation to development of rural territories. These are large businesses, the owners of which are unfamiliar with the issues of the rural areas and should receive government subsidies, as in the U. S. for example, where such corporations do not receive government support. In Russia, 92% of all state subsidies go to 22 agribusinesses, predominantly owned by the members of the Federation Council, deputies of State Duma, and current ministers. The banks also prefer to work with them, especially due to the fact that we are talking about billions, in which it is easy to hide the corruption component. It is certainly the reason why one cattle stall in the large dairy farms reaches upwards of 1 million rubles, while on a regular rural farm it does not exceed 60-70 thousand. Thus the state should first and foremost support the small and medium manufacturers, but in the reality the subsidies and subsidized loans for them are difficult to obtain ^[12]. The situation can be changed only by abolishment of subsidized lending and direct these financial resources to lowering a set interest rate for all businesses involved in agriculture. This will ensure equal access to all agribusinesses to cheaper financial resources, while the mechanism of subsidized lending creates favorable conditions for corruption.

The need for improvement of the food strategy is dictated by the fact that for rural farmers the retail markets continue to be mostly inaccessible. This is because of their insufficient development, lack of transportation means, experience in sales and time to conduct them, since farming is a full-time job.

At the same time, the state policy on import substitution should be based on a strong logistical base ^[11]. To solve this issue the government allocated 80 billion rubles to create wholesale distribution centers, which are responsible for purchasing, transporting, storing farm products, and distributing it to consumers.

But the sensibility of this solution raises questions, since these centers will continue to be too far from small farmers because they are created in large cities, thus it is more profitable for them to work with large suppliers of farm goods.

The planned participation of these centers in purchases of farm products for the processing industry will substantially increase the ingredient component in the price of food, since currently these purchases are made without the middleman.

At the same time, the villages have consumer cooperation, which keeps direct contact with rural farmers and experience in procurement. It does however, have a weak financial and technical base, thus it would be logical to direct at least a part of the allocated funds to strengthen the logistical base of the consumer cooperation instead of creating new parallel structures. This will provide the means for successful development of the consumer cooperation, the need for which is substantiated by V. V. Syroizhko and G. V. Golikova ^{[20, p. 31]}. With lower costs the positive result would be achieved faster, while the creation of the wholesale distribution centers would take much longer, with no guarantee that the funds will be used properly without the corruption component. The 2015 statistics confirm exactly that. In accordance with the subprogram “Development of wholesale distribution centers and infrastructure of the social food systems” there was implementation of new capacities of simultaneous storage of food in the amount of 750.9 thousand tons ^{[3, p. 50]}. In reality, only 231.7 thousand tons of storage has been implemented, primarily in the Moscow region.

There is a good possibility that the access to the services of the wholesale distribution centers will be too expensive for many farmers, due to high costs of veterinarian certificates, phytosanitary control, storage, processing, and packaging of products. This can in turn cause growth in food prices, which should not be allowed to happen according to S. K. Volkov, O. V. Orlova ^[1], L. I. Pronina ^[13], A. M. Sukhorukova ^[19], and others.

It is important to note that the already functioning distribution centers did not demonstrate sufficient performance in organizing procurement. Their efforts are concentrated on the search for favorable rental terms for warehouses, space, and optimization of sales, since due to their monopolistic position in the regions the farmers have no alternative channels for selling their products.The government actively contributes to this by allocating subsidies only for creation of large wholesale distribution centers. For example, state support for establishment of fruit storage facilities is only granted if their capacity is greater than 500 ton of simultaneous storage, for vegetable storage – no less than 1,000 tons, etc.

This certainly a paradoxical situation: more than 80% of the vegetables including potatoes are being produced by the small farms, and it is they who experience with storage and sales of their products, resulting in losses of upwards of 35-40%.But the state supports projects related to creation of infrastructure, storage and sale that is offered by the large developers, who are not very interested in the small business ^[14]. In order to make return on investment, they offer farmers reduced prices for their products, while the services for storing and processing will be high, as is the case in the agricultural industrial park “Kazan” in Tatarstan for example.

In order to resolve these collisions the budget subsidies should be directed not towards creation of large wholesale distribution centers, but the formation of small municipal centers that are mostly oriented towards the producers of agricultural products that can in turn invest their own resources into creation of these centers on the cooperative bases, thus gaining access to formation and distribution of profits from their work.

The need for this is substantiated by the fact that as rightly confirmed by researchers ^{[7, p.21]}, the government could not provide efficient regulation of relations between agribusiness, food processors, and food retailers. Therefore, the agrarian cut in the final price of food is very low and continues to decrease (Table 3).

Table 3. The portion of the raw product cost within the price of food in the Kursk Oblast.

This negatively affects the expanded production and modernization of the machinery in the industry ^{[2, p. 18]}.

The mechanism of the functionality of the agricultural industry in the context of new economic conditions objectively requires improvements ^{[6, p. 17]}. Its main direction should be strengthening of the small farming entrepreneurship, micro entrepreneurs, and agricultural consumer cooperatives, which are in essence microbusinesses (below 15 employees and under 60 million revenue).

This should be started from providing aid in creation of municipal consumer cooperatives, making the share of the participants in the following way: 50% from the federal and original budgets, and 50% from the private funds of the cooperative, including bank loans.

The logistical centers created by the actual farmers will put them in the position where they will be able to influence price formation, control storage costs, processing, and other services, making these services affordable for participants, since the cooperatives exist to meet the requirements of their members.

The access to retail markets and fair prices for products will contribute to the increase in volume of the food produced by the small business, as well as the number of small businesses, which will produce healthy competition.

But this does not mean that there should be development of new targeted programs, the need for which is promoted by some authors ^{[5, 12]}. The agricultural sector is saturated with them, while the historical experience of the country shows that it is not the different programs, but rather a complex planning that ensures efficient development of economy, as in the current circumstances all industries and businesses are in close cooperation. Therefore, the problem of food provision cannot be resolved separately from other socioeconomic issues of development of the country, thus there is an objective need to devise and deploy an integral program for modernization of Russian economy.