Study: Foreigners control 5% of Russia’s farmland through ownership in agroholdings

27 December 2019

Russian official statistics recognizes the following three types of agricultural producers: agricultural enterprises (corporate farms), peasant farms and individual rural households. However, none of these groups officially includes so-called agroholdings – vertically and horizontally integrated large farming structures consisting of numerous corporate farms led by a mother company and operating enormous farmland areas of hundreds of thousands of hectares. This type of organization of agri-food production emerged in Russia after the collapse of the Soviet Union and, according to various sources, grew to operate from 10% to 25%  of the country’s farmland. Although the activities of agroholdings are broadly covered by mass media, this type of producers is still unaccounted for by official statistics.

In order to develop an understanding of the role of agroholdings in the country’s agricultural sector, a group of researchers from Russian Presidential Academy of National Economy and Public Administration (RPANEPA) analyzed ownership structures of 19,000 agricultural enterprises Russia-wide.  They managed to identify 978 complex farming structures, i.e. agroholdings, operating more than one enterprise looking on information about the owners-affiliated parties. In total, there were 2552 enterprises where the majority stakes as well as decision-making power belonged to one person.

Altogether, these agroholdings account for 50% of revenue and 50% of earnings before taxation generated in the agricultural sector of Russia. These shares rose 1.7 and 3 times, respectively, in the last ten years.
Russian agroholdings are mainly specialized in meat and sugar beet productions and less so in grain and dairy productions. In particular, agroholdings produce 65% of poultry meat, 59.3% of pork and 59.4% of sugar beet in Russia. At the same time, they account for 12.2% of beef production, 14.4% of milk production, 22.0% of grain production and 35.0% of egg production across the country. Agroholdings’ share in vegetable and potato production is minor and currently amounts to about 3%.

Notably, 62 agroholdings operating 252 enterprises turned out to be under control of foreign legal entities. Altogether, they operate 5% of Russian farmland, employ 7.5% of labor resources and generate 16.5% of revenue in the agricultural sector of Russia. According to the RPANEPA study, the total share of farmland controlled by foreign and domestically owned agroholdings is 25% of all farmland used by corporate farms in Russia.  Earlier, the EBRD/FAO study  found that all corporate farms, i.e. agroholding-affiliated and standalone corporate farms, controlled 80% of farmland in Russia in 2010 whereas the share of foreign owned enterprises continued to grow despite a number of policy restrictions.

Today’s institutional environment in Russia is favorable for farm consolidation, leaving smaller farms behind with fewer opportunities for funding, insufficient government support and poor social infrastructure in rural areas.  Considering the rapid expansion of agroholdings alongside the government’s support of this process, the authors of the RPANEPA study conclude by expressing their concern about the future of small and medium-scale standalone farms in Russia.

Adapted from www.kvedomosti.ru