Russian agriculture has the following particular features:

· Low level of governmental support that amounts to only 0,8% of GDP.

· Declining soil fertility. According to the results of the most recent soil survey (2005) 42% of the arable area in Russia has a low content of humus, 44% has high acidity level (needs liming), 21% has low and very low phosphorus, and only 10% low and very low in potassium. High acidity level is the main reason for low fertilizer efficiency.

Due to the heavy mineral fertilizer applications during the Soviet period (from 1976 and up to 1990) the soil nutrient balance in Russia was positive for N and P and close to zero for K. After the collapse of the Soviet Union in 1990, fertilizer consumption dropped in a gulf and as of 1995 the balance became negative for all nutrients. Currently, the nutrient balance is negative for all nutrients with deficits of 22 kg of N, 6.2 kg of P and 22.6 kg of K per hectare of arable land.

· Most of Russia is located in zones with risky agricultural production, mainly due to variable and extreme climatic conditions. Two-thirds of the arable land are located in areas with insufficient water supply.

· During last 15 years the price growth for agricultural products was limited due to the drop in purchasing capacity of the people. The combination of such factors as the import of relatively cheap agricultural products and the absence of adequate governmental regulations resulted in a tremendous decrease in agricultural production and a corresponding decline in sown areas and livestock populations.

· During the Soviet period there was a large lag in the intensification of agricultural production, with high production costs, and low labor productivity in comparison with developed countries. After the collapse of the USSR agricultural production underwent a process of deindustrialization over a long period of time, with a return to manual labor and primitive production technologies.

· Russia has undeveloped infrastructure in rural areas, and lacks adequate roads, gas, water and communication supplies.

· Low salaries result in manpower drain and professional migration. Currently, the majority of the population in rural areas is composed of old people.

· The property and land reforms in the mid 90’s (“privatization”) resulted in a break in internal economical and technological relations between the different participants in the agricultural industry.

Arable land.

With a total area of over 17 million km², the Russian Federation is the largest country in the world. It covers the eastern part of Europe and the northern part of Asia. Data for the agricultural and arable areas of Russia in 2007 were 190 and 115 million ha, respectively, with 60% of the arable land located in European part of Russia and 40% in Asia*. The area of arable land declined by 17 million ha between 1990 and 2007.

Most of the arable land (78%) is located in Southern and Eastern Russia (S & E Russia) , while 18% of arable land is in the Central District. IPNI activity will be concentrated in these two regions because they occupy 96% of the total arable land in the country.

Climate and arable soils.

The European part of Russia is divided into seven climatic zones from north to south: north taiga, middle taiga, south taiga, forest steppe, steppe, dry steppe, and desert. Ninety percent of the arable land is situated in forest steppe, steppe and dry steppe, and desert zones.

Chernozems are considered to be among the most fertile soils in the world, and account for 52% of the total arable land. Other soils such as Podzols, Kastanozems, Greyzems and alluvial soils are less favorable for crop production. Solonchaks contain a high content of soluble salts, and Solonetz a high percentage of adsorbed sodium ions. There are 16 and 23 million ha of Solonchak and Solonetz soils in Russia, respectively.

Agricultural production in Russia is particularly subject to the vagaries of weather —mostly frost and droughts— and therefore considered as “risky”. According to a generalization made by the All-Russian Research Institute of Agricultural Chemistry, the role of fertilizers in yield formation is opposite to the weather factor, and increases from 10% in the south to more than 30% on the north of Russia.

Structure of agricultural production.

Farms in our region can be classified roughly into agricultural enterprises or agro-holdings, private farms and household plots. Households plots account for the largest share in the volume of production (53%), followed by agricultural enterprises (41%), and private farms (6%). Large farm enterprises, the successors of the collective and state farms, control 73% of the land, whereas household plots and private farms have 15% of the land. In the last seven years private farms and households have increased output four times, with a negligible growth in area of arable land.

Agricultural enterprises dominate cereal, sugar beet, sunflower and egg production, whereas private farms and households dominate potato and vegetables production.

There is a great variability in the efficiency of agricultural enterprises. It is estimated that the profitability of the 300 best agricultural enterprises is three to four times greater than the average profitability. These 300 best agricultural enterprises are members of so called “Agro-300” club.

Starting in the year 2000 there is a positive trend in the development of agricultural production with an annual growing rate in the range of 1,5-7,7%.

Crops.

For most crops, the fall in agricultural production between 1992 and 1999/2001 was due largely to the reduction in the harvested areas because the poorer, marginal land with very low yields was taken out of production. Since 1992 the area occupied by arable crops, excluding forage crops, fell by 30% at an average annual rate of 1,8%.

More than half of the harvested area has traditionally been occupied by cereals, followed by fodder crops (25%), oil, fiber crops and sugar beet (10% each), whereas potato and vegetable occupy only 5%. Starting in 1992 the share of fodder crops decreased significantly, while that of technical and oil crops almost tripled and doubled, respectively.

Every federal district in Russia is specialized in one or two crops. The Central District produces mainly sugar beet and potato, the South cereals and sunflower, the Volga vegetables, and Siberia cereals.

Livestock.

Animal husbandry was the most affected sector during the restructuring of agriculture that has taken place since 1991. Small and financially fragile producers had to leave the livestock sector due to the impossibility of obtaining enough fodder, high energy prices, and to the general non-profitability of production. Since 1990 livestock numbers have fallen sharply, greatly diminishing the requirements of fodder and cereals as animal feed. However, there are promising signs of gradual recovery in animal husbandry. In 2006 the Government adopted the national program “Development of agricultural industry” focused on the fast development of the animal production sector. According to the project the cattle population would have increased 11% by the end of 2008, due to investments in farm enhancement, pedigree cattle and equipment, and adequate custom regulations for meat import.

In addition the Government has adopted and put in practice the special program for the pig industry “Development of pig industry during 2006-2010 and 2015”, which has resulted in a 13% increase in pig numbers.

Fertilizer consumption and balance.

After 1990, the fertilizer consumption dropped in a gulf, and in spite of the slight increase in the last five years it hardly reaches 15% of the consumption level in 1990. There are many reasons responsible for that fall. First of all, the fertilized area shrunk by half, and in 2007 it amounted to only 35% of the total sown area. Secondly, the fertilizer application rates in almost all crops decreased substantially from an average of 88 kg nutrients/ha in 1990 to 33 kg nutrients/ha in 2007. The most significant reductions were for sugar beet (186 kg/ha), flax (134 kg/ha), sunflower (69 kg/ha) and fodder crops (68 kg/ha). Because of the very large area involved in fodder crops (42 million ha), the reduction in fertilizer application rates explains about a quarter of the total reduction in fertilizer consumption.

According to estimations by the All-Russian Research Institute for Agrochemistry the balanced ratio in mineral fertilizer consumption should be 1,0: 0,9: 0,7, whereas the current ratio is 1,0: 0,4: 0,2.

The present annual balance is negative for all nutrients with a deficit of 22 kg of N, 6 kg of P and 23 kg of K.

The largest fertilizer consumer is the Central District (33%), followed by the Volga (28%) and South (27%) districts. The S&E Russia region, which includes the South, Volga, Ural and Siberia districts, is responsible for 63% of the fertilizer application in Russia.

The main fertilizer use constraints in Russia can be summarized as follows:

• Inadequate of agriculture and the lack of small and medium size enterprises.
• Reduced livestock numbers.
• Low-gate prices for agricultural commodities.
• Inadequate use of modern agricultural production technologies.
• Inadequate fertilizer distribution system.
• Collapse of the advisory and soil analysis system.

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* Goskomstat, 2009