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President of Russia Dmitry Medvedev: Good afternoon, colleagues,

We are here today to discuss the development problems facing the agriculture sector, but we will look at these problems of course within the context of the global crisis that has hit the world today and that affects our country too.

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This year, we began carrying out a state programme to develop the agriculture sector over the coming five years. You will recall that it took quite some effort together to get this programme adopted and in effect transform the national project into this state programme. The aim of this programme is to develop the rural areas, make our agricultural producers more competitive, and preserve and regenerate land resources. Over this time, a number of events have taken place, not only difficult events but also some very good events. This year we have had our biggest grain harvest in the last 15 years – more than 100 million tons. This is a very good result and it makes it possible for us to cover our country’s demands for grain for foodstuffs and for animal feed. It will also help to boost our export potential of course.

Over these last nine months, agricultural production has increased by 6.5 percent. These are the highest figures in the last seven years. This proves what is absolutely evident but true all the same, namely that when the state makes agriculture a priority and invests in developing the rural areas and encouraging business there, the results soon follow. Our big task now is to make the sector more attractive for investment through carrying out infrastructure projects, big projects, medium projects and even small projects.

There are some obvious problems in the sector. First of all is the problem with investment arising from the fact that credit has become more expensive. Business in the agriculture sector, and indeed in the economic sectors, has fewer possibilities now to replenish basic funds by drawing on external sources, and next year, going on the current trends on the credit market, many businesses will be obliged to carry out modernisation using their own resources.

I have just met with my colleagues and we discussed development problems. We will discuss this further. Of course, this is the biggest and most complicated factor holding back development at the moment. We need to be ready to do everything we can in this situation. We need to use what possibilities we have to clear the way for money to flow into the sector, but it is clear that the situation will remain complicated for a while yet.

As you know, the authorities are already taking measures. First, we have decided to accord a subordinated loan of 25 billion roubles to Rosselkhozbank at a special interest rate. We have also decided to increase the contribution to Rosagroleasing’s charter capital by 4 billion roubles. This is the first part of the package.

The second part of the package aims at encouraging the big banks to increase the amount of loans they accord to businesses working in the agriculture and food processing sectors. Measures are also required to maintain and develop credit for leasing operations for agricultural machinery. This is evident.

Finally, the third part of the package aims at expanding budget subsidies for agricultural enterprises’ expenses for seasonal work. This is something we were already doing, and I think we need to continue this practice. Furthermore, we need to simplify the public procurement system. This is also an important task.

We need to work on infrastructure development too. Infrastructure plays a crucial part in resolving the agriculture sector’s and rural areas’ problems. We already have achieved results. I would say they are only modest for now, but they are positive nonetheless. Over the first six months of this year we built 372,000 square metres of housing, and this is a lot better than a few years ago. This total includes around 200,000 square metres for higher education graduates and young families – that is, the areas we began working on some time ago. This has not been without problems, but the figures have been growing. This is good to see. At this difficult time, if we cannot manage to keep these figures growing we at least have to maintain this pace that we have now.

What do I want to say overall at the start of our discussion? Of course, Russia has its own solid possibilities and reserves to minimise the risks of the global financial crisis, and not only the financial crisis. We realise that the financial crisis comes on top of the food crisis that has shaken many parts of the world. But at the same time, it also creates new opportunities for Russia’s agriculture sector. Why do I say this? Because given the current situation, our country has a chance today to increase its contribution to the world’s food basket.

Of course, we need to concentrate first of all on resolving our internal problems and ensuring we can meet our own foodstuffs needs. This is our top priority. But we also need to make our entry into other markets, all the more so as we have the possibilities and the desire to do so.

I am sure that in these difficult conditions, and with the slowdown in foodstuffs imports, our agriculture market has every opportunity for successful growth. We need to do everything we can to make this possible.

Minister of Agriculture Alexei Gordeyev: First of all I would like to thank you, Dmitry Anatolyevich, for taking the time to meet with the Russian Agrarian Movement. This is a non-political organisation that brings together interested forces in agricultural development and the transformation of the rural way of life in the 21st century. Today the entire spectrum of agricultural sectors, from farming to large agrobusiness is represented at the meeting.

This year, for the first time since we started building a market economy, we are operating according to a five-year state programme for agricultural development. The mere appearance of the programme represents a new, important stage in federal agricultural policy. And of course the priority national project Development of the Agro-Industrial Complex played a crucial role in this.

According to Rosstat, the first 9 months of this year can already be described as one of the best periods in the modern history of Russia’s agricultural production. The index of production of agricultural products amounted to 106.5 percent, that is 2.7 percentage points higher than the forecast for this year. Accordingly, the output of livestock products grew by 4 percent and crops by 9 percent. As we already mentioned, we have produced the largest grain crop of the last 15 years — more than 100 million tonnes in net weight. The resulting yield — 22.2 hundredweight per hectare – is a record in the history of Russia. In addition, we have produced 60 million tonnes of wheat – a valuable crop — for the first time.

So we can fully meet the country's food requirements as well as feed grain needs, and we retain about 20 to 25 million tonnes that can eventually be exported. We are becoming a major player in the world grain market. We have achieved high results in the production of rice, sunflower, sugar beet, vegetables and potatoes.

With respect to livestock, the industry is a priority for the development of agriculture as a whole in the next five years, both within the state programme as well as the national programme. We must say that a positive dynamic remains and, in particular, meat production increased this year to 7.5 percent. There has been particularly remarkable growth in the poultry industry — 16.5 per cent — and the pig industry — more than 8 percent.

Milk production continues to increase. This year growth will amount to about one and a half percent, although admittedly this is behind the projected target. In 2009 the Ministry will pay increased attention to this area.

Increasing amounts of fixed investment have played a crucial role in the development of agriculture this year. In the first 9 months of 2008 the volume of lending in the agro-industrial complex surpassed that of last year by 20 billion roubles, and amounted to about 324 billion roubles.

Unfortunately, as we know, the global financial crisis has affected our economy. The cabinet has just instructed the Ministry of Agriculture to prepare an action plan to offset the negative impact of the global crisis on Russian agriculture and ensure the strict implementation of the five-year state programme. Moreover, next year

we have set ourselves the task of paying greater attention to meat and dairy animal husbandry; the appropriate financial resources have already been set aside in the 2009 budget. And our task together with agricultural businesses is to develop a mechanism that minimizes the negative effect from the world's financial and food markets.

I would add that in accordance with your request, before the end of the year we need to adopt a food security doctrine which will finally create a regulatory framework for the implementation of long-term socio-economic policies in agricultural production.

We cannot but mention certain problems and difficulties. They include the recent difficulties associated with lending, the problems of marketing agricultural products (this is especially true in the event of a good harvest), maintaining a fair level of prices and the profitability of agricultural production, the need for a more ambitious approach to solving social problems in rural areas, and a number of other issues.

However, instructions have been given in all these areas and the Prime Minister, the President and the Ministry are all working on it.

President of the Agro-Industrial Group Yug Rusi Sergei Kislov: Thanks to the implementation of the state programme there have been significant successes in agricultural development. Today the agricultural industry is interesting for business and rural workers are regaining confidence. About a quarter of the grain and sunflower oil produced are now exported, and this represents a great deal. As little as 9 years ago Russia imported sunflower oil and grain and needed food donations from the international community. That is, in 9 years we have gone from being a recipient to a donor country.

Today our country is definitely one of the four leading international exporters of grain and among the top three exporters of sunflower oil. In this regard, coordination between business and the authorities concerning exports of agricultural products remains urgent. It is important that we develop international relations in this regard. A particularly important issue is the public insurance of grain exports for given countries. This is especially important now, during the international financial crisis.

Russian farmers are integrated into the international market. We operate in a fiercely competitive environment and they should benefit from equal conditions. It is difficult to compete with Europe because it subsidizes exports of grain. This is a powerful market measure which regulates the export of grain, the size of the domestic market and, most importantly, domestic prices for grain — something that supports farmers. It would be good to develop a system of subsidies for grain exports.

Dmitry Medvedev: I think that we should prepare and examine such a proposal because we are now supporting the exports of our domestic industry, but of course we need to support the exports of our farmers if we consider this to be feasible and warranted.

So perhaps you will need to explore this topic and instruct the cabinet to look at how much it might cost and who would be affected: is there a specialized insurance organisation or a network of such organizations? In general, you need to look at this issue in light of the government guarantees for exports of industrial products that are now in place.