The Agriculture and Food Sector in Russia: Global Opportunities for Growth

Over the past few years, Russia has seen exceptional growth in the agriculture sector, which has sparked a serious interest among investors. Amid the volatile prices in the hydrocarbon market, the government gave credence to non-oil-and-gas exports, including food supplies and services, implying they have significant growth potential and may provide the much needed support for the stagnant Russian economy. Since then, mostly after 2014, Russia has achieved its food security targets (production of core product clusters and basic commodities to exceed consumption by 80%): this caused a general glut of certain commodities and a pressing need to boost exports of food products. Within this category, the year 2017 ended with USD 20.7 billion of exports. In May 2018, Putin announced Russia's new ambition to reach USD 45 billion of food exports by 2024.

At first glance, this seems like mission impossible. To reach such volumes assumes that exports will increase by 12% on average per year for the next six years – the Russian agricultural sector has never been so successful. On the other hand, the actual export performance of Russia is two times less than in the Netherlands for example, which is only half the size of Krasnodar Krai and Russia’s exports are just twice as much as Ireland's exports – a country which is thirtyfold less populated than Russia and 250 times smaller in area.

The basic analysis shows that Russia continues to use its abundance of natural resources quite inefficiently, both arable land (ranked second in the world) and farmland plots (ranked fifth). The country demonstrates poor numbers of average crop yields and penetration of agricultural technologies: its machinery fleet requires significant upgrades, and agricultural producers suffer from a shortage of skilled labor.

To date, the current export pattern comprises 70% of exchange commodities: cereals, frozen fish (gutted, headless) and vegetable oil. Consequently, the export value per ton of Russian agricultural products is four times cheaper than the cost of food imports, and dramatically differs from the average value of food imports in some of the target markets.


The complexities of the Russian agricultural sector and the challenges that the national economy faces today are the factors deterring multiple foreign investors. At the same time, we observe a significant transformation in global food consumption and production, which is creating a surge of global money into agriculture. Unfortunately, this money does not flow in Russia as much as would be desirable. However, those, who are ready for investment guided by the perception that Russian agribusinesses is fundamentally undervalued and who count on the ongoing Russian integration in the global agri-food chain, will ultimately benefit and deliver value both to their shareholders and global consumers – through an increase in food production and diversification of supply in the global market.

Today, the Russian agricultural sector attracts more attention from investors that are representing countries with a focus on national food security. These are primarily sovereign wealth funds in the Middle East and large Asian financial corporations. Eastern investors are notable for playing the waiting game to pick the right moment for injection and long-term investment opportunities.

In our opinion, today's environment provides quite adequate entry conditions for them. That is why we see a series of buy-ins completed by Thai CP Food, Vietnamese TH True Milk, Japanese Mitsui, Singaporean Olam, Chinese Cofco and Fosun. Mutual funds demonstrate activity in the Russian investment market, for example, the Russia-China Investment Fund (RCIF) and a partnership between the Russian Direct Investment Fund (RDIF) and Abu Dhabi's state-owned Mubadala fund. With regard to the issue of western companies, the Russian market is represented by the whole spectrum of world traders, such as ABCD and Glencore. However, most of them, except for ADM, entered the market when Russia-West relations experienced great friendship. ADM entered the market in 2018, which underpins the idea that business interests can rise above politics.

What are the prospects for Russian food producers? We see that the sector continues to demonstrate an attractive revenue-generating capacity and investment ideas, such as the infrastructure for commodities distribution and advanced processing. There is significant potential for technology penetration as well – from the upgrade of agricultural fleet to the introduction of electronic trading platforms (marketplaces) for domestic and foreign trade in food and agricultural products. The recently announced partnership between Alibaba and, the launch of a new joint venture between ADM and Aston to produce sweeteners and starches in Ryazan Oblast – these are the real cases in support of the current trends.

The government has announced major plans to accelerate growth of non-resource exports and its intention to support this business. The Ministry of Agriculture is developing government-sponsored export support programs – from recovery of capital expenditures to concessional financing, subsidizing of logistics costs and implementation of joint investment projects with businesses.

The Russian Export Center offers a wide range of services to promote Russian goods in cross-border markets. Regional authorities also provide feasible support to businesses. In addition, the ruble has been quite volatile, fluctuating to low values for the last couple of years. The current business environment offers quite favorable conditions for producers and exporters of Russian food commodities, which is a promising sign for the sector, thus encouraging us to believe that Russia will take a worthy place among global food suppliers in the near future.

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To sum up, we would like to present some background information about Russia in order to provide a bit of insight into the potential of our country to those who are not well acquainted with it:

- Russia has a surface area of 17 million square kilometers extending from the Arctic to the subtropics. There are more than 190 ethnic groups with unique traditions and specific nature of production – this opens up wide opportunities for local producers.

- In contrast to the US and Europe, the Russian government has officially banned the cultivation and breeding of genetically modified crops.

- Russia has huge potential to become the leader of organic farming: 10 million ha of arable Russian land is still idle. Meanwhile, Europe has already depleted its arable resources.

- And finally, did you know that sun never sets on Russia?

Welcome to Russia – invest and succeed.

Bulletin Online

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Bulletin Online

Date Published:

01 May 2019


Vitaly Sheremet, Partner, Agribusiness Center of Exellence, KPMG Russia and the CIS and Ludmila Zueva, Senior Manager, Agribusiness Center of Exellence, KPMG Russia and the CIS