In 2024, the total profitability of the crop production industry could be about 20–25%

Profitability in crop production will continue to decline in 2024, ACRA predicts. According to analysts, it may fall to the lowest level since 2019, 20–25%. The reversal in the dynamics of the indicator occurred in 2022 – several years before that, the profitability of crop production was growing rapidly. Its gradual decline that is now being recorded is explained by a combination of factors, including a decrease in domestic and world grain prices due to record Russian harvests of the last two years and an increase in domestic costs for agricultural cultivation technologies due to sanctions. Additional pressure on profitability in the coming years will likely be exerted by an acute shortage of personnel: competition for employees with other industries, according to ACRA estimates, is already forcing the agricultural sector to increase wage costs.

In 2024, the total profitability of the crop production industry may be about 20–25% – this forecast is contained in the analytical commentary prepared by ACRA. In fact, we are talking about the fact that the indicator will drop to a minimum since 2019. Let us recall that before the start of the military operation in Ukraine, profitability in crop production was growing rapidly: for example, if in 2019 it was 21.5%, then in 2020 it was already 37.1%, in 2021 – 52.1%. In 2022, the dynamics reversed: the figure then dropped to 37.9%. Last year, as follows from data updated by the Ministry of Agriculture, it amounted to only 26%.

One of the reasons for this trend is the decline in world prices for the key position of Russian agricultural exports, grains. As analysts remind, prices for them “are at a minimum under the pressure of high supply from Russia and other countries of the Black Sea region.” Prices on the domestic market are also not growing – due to two consecutive high harvests (153 million tons in 2023, 157.7 million tons in 2022), carry-over grain stocks were at a record high at the beginning of this season.

At the same time, the situation is seriously complicated by a significant increase in costs for agricultural cultivation technologies, ACRA notes. Adaptation to changing conditions after the start of the military operation in Ukraine required farmers to increase expenses. In particular, agricultural producers had to spend more on updating their equipment fleet: the severance of relations with foreign suppliers reoriented them to purchase Russian products, the prices of which were rising due to problems with the import of components and various logistical difficulties.

Planting crops were becoming more and more expensive for farmers due to rising seed costs. ACRA reminds that the food security doctrine involves increasing the share of domestic seeds in agriculture to 75% by 2030. So far there is no talk of exceeding target indicators, and the Russian Federation imports a significant share of the seeds used by agricultural producers from other countries (for example, grain legumes are still considered “import dependent”): at the same time, prices for them are already high, according to market participants , are increasing due to restrictive measures (see, for example, “Kommersant” dated December 29, 2023), which are introduced by the authorities to stimulate import substitution.

Separately, ACRA notes the problem of lack of personnel in the agro-industrial complex, which is putting pressure on profitability. At the end of 2023, we recall, it was estimated at 200 thousand people (see “Kommersant” dated December 12, 2023). Analysts note that competition for personnel is forcing companies in the sector to increase employee salaries.

Kristina Borovikova