The Ministry of Agriculture is rethinking budget support for farmers

The approach to allocating subsidies to regions to reimburse part of the costs to grain producers may be changed. The draft government decree prepared by the Ministry of Agriculture suggests that when choosing territories to receive subsidies, the authorities will focus not only on production volumes, but also on “economic feasibility,” in fact, on the current price level for the main types of grain. This new logic for the distribution of budget money is explained by the overstocking of the grain market – in conditions of weak demand from exporters, it leads to a decrease in domestic grain prices.

The Ministry of Agriculture published on regulation.gov.ru a draft government decree that should change the logic of the distribution of subsidies provided to the regions to reimburse part of the costs of farmers for the production and sale of grain. The meaning of the proposed amendments is for the authorities to form a list of regions receiving subsidies, focusing not only on production volumes, but also on the price level for the main types of grain in the current agricultural season. It is proposed to determine the “economic feasibility” of issuing subsidies on the basis of data from the state “System for monitoring and forecasting food security of the Russian Federation.” This information system should help authorities identify regions with lower profitability of grain production. This, as stated in the explanation for the project, will provide maximum support to a larger number of producers from such entities.

The ministry explains the importance of adjusting the distribution of funds by the situation on the grain market, in particular, by the fact that high harvests in recent years have put pressure on prices on the domestic market. It should be noted that in recent weeks alone, official grain harvest forecasts have been increased at least twice. At the beginning of the month, the Ministry of Agriculture raised them from 130 million to 135 million tons; on October 18, Vladimir Putin announced 137–138 million tons. In the face of significant carryover reserves (last year’s harvest was a record 158 million tons), the authorities again intend to help the market, which is not yet able to cope with the current situation on its own.

The problem of the continuing decline in grain prices is known and widely discussed (see Kommersant on September 18 and October 6). According to the Sovekon analytical center, due to almost zero demand from exporters (for more details, see Kommersant on October 9), last week the price of third-grade wheat decreased by 200 rubles, to 12,675 rubles. per ton, the fourth – by 225 rubles, up to 11,450 rubles. per ton.

The draft resolution prepared by the Ministry of Agriculture looks like a situational response to the described problem and is combined with other government measures to maintain the profitability of farmers. In particular, we are talking about the grain purchases to the state fund announced by the head of the Ministry of Agriculture Dmitry Patrushev. Let us remind you that purchasing interventions remain one of the main measures to combat falling prices in the market.

However, the current situation may only be a reason to adjust the approach to the distribution of subsidies: the rules proposed by the Ministry of Agriculture may indicate that the ministry is satisfied with the real-time statistics from the food security monitoring and forecasting information system and wants to more actively use it to spend funds more efficiently. Let us recall that previously the Ministry of Agriculture was not satisfied with the incomplete use by some market participants of industry information systems, in particular the FSIS “Grain” (see “Kommersant” dated September 16 and October 14, 2022).

Kristina Borovikova