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State Council   /

Speech at State Council Presidium meeting on regulating domestic food market

September 2, 2010, Saratov

President of Russia Dmitry Medvedev: Good afternoon, colleagues,

This is an important meeting on the sidelines of the State Council Presidium session. Our subject today is highly relevant and absolutely vital: the situation in the food market. I have devoted the past two days to this issue: I visited the Orenburg Region yesterday, and today I am in the Saratov Region, where this meeting is being held. Yesterday I looked at agricultural production in the Orenburg Region. I hope the colleagues who have been invited to this meeting have joined us today here, in the Saratov Region. I visited a number of production facilities and shops yesterday, and have talked with the locals both here and in Orenburg. I went to the farmers’ market today to make sure I have an inside perspective on the situation.

Here, in this region, the overall situation is normal, but we have been receiving signals from several regions about price hikes and shortages of a whole range of food products. In the meantime, it is absolutely clear that there are no prerequisites whatsoever for any food shortages in our country, despite a very difficult year. According to the experts, both the professionals engaged in the economy and those who are involved in the reverse side of the economy, the criminal side, this situation is caused entirely by profiteering. Despite the abnormally hot weather and the drought, the country has sufficient reserves of grain. Even the most pessimistic forecasts put the harvest figure at no less than 60 million tons. Taking into account carry-over stocks of grain, which are 21 to 25 million tons, this will suffice to meet the domestic demand for food and fodder grain.

According to the Agriculture Ministry forecasts, and we will hear a more detailed report from Agriculture Minister Yelena Skrynnik, there will be no shortages of meat, milk or sugar. In this context, the task of the Government and regional authorities is to prevent economically unjustified price increases for agricultural products and food, not to mention any foods temporary disappearing from shop shelves.

We have forecasts on meat, meat products and milk stocks. We will hear them later, I hope, but we also need to monitor the situation – and I have given instructions about this before – with staple foods: flour, bread, meat and milk. This task is the responsibility of the Government and the regional authorities. Particular attention must be paid to the validity of price increases and the effectiveness of state regulation measures. What do I mean? This includes antimonopoly regulation and trade legislation observance, including the latest edition of the law On Trade. And the Prosecutor General’s Office, the Interior Ministry, the Federal Anti-Monopoly Service and the Federal Tariff Service should deal with those responsible for hiking up prices to obtain unreasonable profits, regardless of who they are, whether the processing or trade companies.

We have just discussed the issue of buckwheat. I went into a shop earlier today and talked with the people. They say: ”No, everything is normal, the prices are stable, but there has been a certain increase in the price of buckwheat.“ Clearly, it was caused by profiteering. But it’s not that simple. Buckwheat is often bought in large retail chains and supermarkets with trucks arriving in the evening to load entire stocks of buckwheat available to sell it next day at the market or in small shops, stalls and so on. We do understand that supermarkets should not do this, because it is obvious that this boils down to wholesale trade in goods bypassing the consumers, and the purpose of a shop is entirely different. It is clear that their purpose is to sell their goods quickly but in this case, as a retail chain, it is violating trade legislation. This is just one example, but to be honest I believe that it is going on in other regions too, because our people are good at business. They get information and see a way to make a quick profit. Therefore, this task is also the responsibility of law enforcement agencies.

Today, we must consider a number of additional steps. The first thing to do is monitor the spending of the funds that have already been allocated to support drought-affected regions. The Government has drafted a set of support measures. Total allocations amounted to 35 billion rubles [over $1.1 billion]. Of those, 25 billion rubles will go for budget-funded loans, and 10 billion will be direct subsidies to the regions, which, in fact, means direct subsidies to agricultural producers. This substantial amount must be distributed rationally.

In addition, I already issued instructions to the Government to draft measures to support the solvency of the agricultural producers affected by drought this year. The measures should include loans, in some cases the extension of loans, if necessary, and monitoring of interest rates. On the whole, our loan market situation is reasonable but we must ensure that our largest banks engaged in lending to the agricultural sector (I am referring to Sberbank, the Russian Agricultural Bank and several other large regional and federal banks), pay particular attention to farmers. The banks must be especially careful, because the farmers are going through a hard period.

At the same time, the regions must develop their own action plans to support the affected agribusinesses, including private farms as the most vulnerable form of an agricultural enterprise, as well as measures to stabilise the food market and help the least protected social strata. As far as I know, Tatarstan has already developed and operated such a plan. Other regions that do not have the plan yet, must have it soon and report on the results.

Second. Expectations of price hikes are largely caused by the rumours about grain shortages following the drought and anxiety regarding next year’s harvest. We mustn’t get all worked up. Yes, we must think about the future, but there is no need for anxiety. We should work calmly and steadily. It is true that our regions are having problems and the harvest in some cases is lower than usual, and in some regions it is drastically lower than normal. Nevertheless, there is no reason to treat the situation as critical. We have extensive grain-producing areas, located first of all in the Southern Federal District and the North Caucasus Federal District, where the situation was also hard, where there was an unusual heatwave too, but not as bad as in the Central and Volga Federal Districts. There [in the Southern Federal District and the North Caucasus Federal District] is certain potential [for grain production]. These efforts must be based on an inter-regional balance, and in order to ensure this balance, it is necessary to arrange transportation [of agricultural products]. Therefore, I instruct the Government and the Russian Railways to find a solution on transportation tariffs for this period.

I have just spoken with the CEO of the Russian Railways and with the top Government officials. Think of a way to achieve this. The issue is not even in the essence of this mechanism, whether it will involve compensations or not, but at the moment we need to make sure that the tariffs are lowered because otherwise the investments made in recent years will be wasted. All of us were involved in the preparation and implementation of the [Agriculture] National Priority Project, our ambitious programme for the development of agriculture. This money should not be lost, so either we will spend less money or someone will have to tighten their belts.

There is one more thing I would like to mention in this context. I know that we have regional leaders present here, and each of you is responsible for the situation in your region, for your own people. That is only right, but we cannot allow regional protectionism. We have a single market in the country, and all the people who live in our country are citizens of a great, unified country, the Russian Federation. Therefore, we will catch the speculators, but the regional protectionism is unacceptable too.

We must wait for the outcome of the harvest in Siberia, when they finally clear the federal and regional grain balance. And finally, we have our intervention fund, and resolutions have been adopted in this regard. I met with agricultural producers and government officials to discuss this issue. The question is when should we begin using the fund. This is a Government responsibility and depends on the current situation. While there is enough grain in the market, we will use it, but if problems arise we will unseal our reserves.

Now about the future harvest. It is essential to sow winter and spring crops efficiently and on time, perhaps taking into account the time delay. All the decisions to make this possible have already been taken, and it will be an important signal and should have a positive influence on price dynamics, even just on a psychological level. So I would ask the Agriculture Minister to report on the prospects of the upcoming agricultural works, and would also like to hear from the Governors.

Third. Implementation of these measures should not overshadow our strategic objectives that we set five years ago: the modernisation of agriculture and the processing industry. In the previous years our efforts proceeded at a very good pace. We made Russia a leading exporter of grain in the world again, and we will move forward despite all the difficulties. Our main objective is not the export, although that is an important element; our objective is to ensure abundant food supplies in our country and create conditions for the development of efficient profitable farms. So we need to balance all the components of the agricultural production chain.

Colleagues, we have already done a great deal to enhance food security. I think that five to seven years ago nobody could have imagined how our agriculture would grow, or the number of new entrepreneurs that would appear – young entrepreneurs, who tackle production with enthusiasm. Some of them are present here, and I have visited some of them at their businesses. There are many truly inspiring examples, but we must make sure that the money allocated to agribusinesses plays its role. This also applies to the 87 billion rubles [some $2.5 billion] allocated during the crisis last year.

Fortunately, many companies did not cut back on their investment activity or on production but continued to develop it and introduce new technologies. I had the opportunity to see that for myself in these past two days. I saw dairy and vegetable production in Orenburg, and today I visited the Trudovoi pedigree cattle farm and the new meat processing plant Mitek. All of this is due to investments which, in fact, were planned in the crisis year. That makes such investments so much more valuable, and we cannot lose them.

In conclusion, I would like to stress once again that there are no objective prerequisites in our country for significant prices increases. All the instructions have been issued and the Government is working on the issue. The Government and the heads of regions must keep the situation under control, and where necessary, make prompt decisions on providing support [to agricultural sector]. Naturally, if the situation changes I will make decisions to ensure that our people have quality and affordable food, because that is an essential component of our work. Let it be clear: this is a state priority.

Today I would like you to tell me not only about how we help our agricultural producers, which is an important issue, and not only about ways to stabilise the situation, but what steps we are taking to make sure that the food market remains stable. That is my request to the heads of the regions. Let's get down to work.

* * *

I am glad we had this chance to meet today and touch base. The instructions I have issued must be implemented as quickly as possible. On the whole, the things I heard today inspire moderate optimism. In what respect? The Government and the Agriculture Ministry are working in close contact with producers, associations and autonomous organisations of commodity producers, and with the regions. So we can say that the past month, when we realised that we are having difficulties in the food market, has not been lost. I have met with business representatives in Taganrog, saw a few things here and in Orenburg, and talked with you. I would like to say that I intend to monitor this issue personally for at least another month and will badger the Government and the regions about it to make sure that everybody understands the situation. I will do this for one simple reason: this issue concerns the entire population of our country, absolutely everyone.

See you soon.

September 2, 2010, Saratov