Russian agroholdings and their role in agriculture

ABSTRACT

Agroholdings have become a major player in Russian agriculture in less than two decades. Nevertheless, there is no legal definition of agroholding as an organisation, and no statistical information on agroholdings as a distinct category is collected. Only informal definitions exist, which regard agroholdings as groupings of agricultural enterprises linked into a single management network. The numerous publications on Russian agroholdings are mostly based on limited or sporadic data. This is the first study that assembles a full list of more than 1,000 agroholdings in Russia and analyses the corresponding data from official sources. The study examines the role of agroholdings in Russian agriculture and estimates some performance measures. We group all agricultural enterprises (corporate farms in their own right) in Russia into agroholding members and independent, non-member farms, and perform a comparative analysis of the two distinct organisational forms that are at the focus of Russian agricultural policy.

KEYWORDS:

• Agroholding
• Russian agriculture
• farm structure
• large-scale farms
• megafarms
• latifundia

Acknowledgements

The authors would like to acknowledge the technical assistance and the useful comments of Ekaterina Gataulina and Ekaterina Shishkina, both of the Centre of Agricultural and Food Policy at RANEPA. Professor Margaret O’Mara of the University of Washington offered insightful observations on the risks of excessive concentration of regional employment. The authors are also grateful to an anonymous reviewer for their valuable suggestions. The remaining errors and omissions are entirely the authors’.

Some preliminary results from this article were previously reported in Uzun et al. (2019, section 3.3). The present article uses a slightly revised methodology for the identification of agroholdings, which changed the total number of agroholdings identified, their share of production, and other results. The analysis is substantially broader than in the 2019 article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. The term ‘agroholding’ appears to have entered the Western agricultural-economic literature only in 2003, in two French-language publications by Cordonnier (2003) and Yefimov (2003). The term was initially regarded as a synonym for very large farms (‘latifundia’) as it grew out of another term ‘new agricultural operators’ introduced by Rylko and Jolly (2001) (the explicit link to agroholdings was established only in Rylko and Jolly (2005)). The large-size characterisation of agroholdings persists to this day in the Western literature (see, e.g. IAMO (2017) and Grouiez (2018)).

2. Because of the focus on Russian agroholdings included in our database, we did not go into international comparisons, which also may be covered in future research. Readers interested in agroholdings in other countries are referred to, for instance, Hermans et al. (2017) and, possibly, (caution: the presentations in this collection are unfortunately password-protected). In addition to Russia, agroholdings appear to be fairly widespread in Ukraine and Kazakhstan, among the formerly socialist countries, as well as Argentina, Brazil, and Australia (although the information on Australia suggests that these are simply large corporate farms, not unique organisational forms (Plunkett et al., 2017)).

3. By 2006, only 4% of the land allocated in the form of shares to rural individuals had been withdrawn by the beneficiaries for use in own peasant farms or household plots (Sedik et al., 2018). In a survey conducted in Moscow Province (Mozhaisk District) in 2002–2004, around 80% of shareowners reported that they had sold their land shares, to the highest bidder (Shagaida, 2002–2004). The costs of converting a land share into a private plot were prohibitive, so that individual smallholders could not affort to register and title their land, again preferring to dispose of it.

4. Although the original decree allowed any legal-organisational form, a special provision (art. 1, para. 1.3) required that holding companies and their daughter enterprises be organised as open shareholding companies.

5. In Western economies, agricultural producers may be linked into groupings by management contracts, not by ownership (see, for instance, Senesia et al. (2017) for the practice in Argentina). In contract farming, the principal determines the production technology and provides working capital (seeds, fertilisers and herbicides, feed, young animals) whereas the contracted farmers provide labour, land, buildings, and production services. Such ‘contract agroholdings’ still do not exist in Russia and are not included in the database. Ordinary contracts between producers, processors, marketers, and suppliers are quite widespread in Russia, but they are much less restrictive than the management contracts practiced under contract farming.

6. This definition of agroholding is substantially broader than the more conventional definition proposed by Grouiez (2018, p. 1013), as it does not require inclusion of a food processor and does not assume that ‘the cropland used by agro-holdings is larger than for any other kind of farming operations.’ This size-driven approach echoes IAMO (2017), where an agroholding is posited to operate at least 10 thousand hectares.

7. The agroholdings identified in this step of the procedure were called first-level agroholding. Further grouping of first-level agroholding by their principal owners produced second-level agroholdings, each of which consisted of two or more first-level agroholdings with the same principal owner, and so on for third-level and higher level agroholdings, until no new groupings with the same principal owner were detected.

8. Primary data for non-agricultural corporations are available in Rosstat and in the relevant ministries, but so far they have not been aggregated into a single database, similar to Ministry of Agriculture’s database of agricultural enterprises (Corporate farms, 2016). Limited information on non-agricultural components of member-enterprises is available in SPARK (subscription access).

9. Foreign citizens are not identifiable as shareholders in the existing registers, and all foreign agroholdings are owned by companies.

10. In this paper, we use two sales-based partial productivity measures – sales per hectare and sales per worker – as a proxy for efficiency. Data limitations precluded the calculation of output-based partial productivities and total factor productivities.

11. The breakdown by legal status of head company exists only in the 2016 annual reports of agricultural enterprises (Corporate farms, 2016).

12. Large offshore companies benefitted from hundreds of millions of US dollars in state subsidies in 2013–2016.

13. Hahlbrock and Hockmann (2011) found a similar result in Belgorod Oblast, where agroholding members outperformed independent enterprises by partial productivity measures and also by Total Factor Productivity. Hockmann et al. (2007), on the other hand, did not find any significant technical-efficiency advantages among agroholdings in Orel Oblast. Vasil’eva and Bil’ko (2017) found that, in the Russian Far East region, agroholding members were less efficient than independent enterprises by Total Factor Productivity. The differences in results are probably attributable less to different efficiency estimation methodologies than to differences in sample sizes and especially to regional differences across the huge expanse of Russia. Matyukha et al. (2015), using a much smaller sample of some 60 agroholding in two oblasts (Belgorod and Moscow), did not find evidence of superior performance of agroholding members by any economic indicator.

14. The share of agroholdings in commercial production (sales) is generally higher than their share in total agricultural production. Thus, in 2016, agroholdings accounted for 20% of milk sales (4.0 million tons of milk sold out of 20.6 million tons total milk sales), compared with 14% of total milk production (see Figure 4).

15. The specialisation of an agroholdings is determined by the activity that earns the majority of its revenue. Agroholdings are classified as crop-specialised or livestock-specialised when the share of revenue from the corresponding activities is greater than 50%. Other specialisations may include industrial or service. Within crop and livestock specialisations, an agroholding is viewed as specialised by a specific commodity when the share of revenue from that commodity exceeds 50%. If none of the products meet this threshold, the agroholding is said to be non-specialised (in crop or livestock production).

16. Household plots and peasant farms are the two legally recognised distinct components of the individual or family farming sector in Russia (and other CIS countries). For differences between the two forms, see, e.g. Giovarelli and Bledsoe (2001), Lerman et al. (2004), and Wegren (2009). The term ‘peasant farms’ as used in the transition context does not necessarily match the usage in developing countries.

17. Partial landownership data for 2013 were available from the financial reports of agricultural enterprises in 35 regions (Corporate farms, 2016). Agroholding controlled by physical persons could not be identified in the existing database.

18. For a discussion of land transaction mechanisms in Russia, see Shagaida (2010) and Uzun and Shagaida (2015).

19. There are many historical examples illustrating the risks when a region or country becomes too dependent on a single employer. Such risks are typically characterised in the literature by the dangers of deindustrialisation in regions with strong regional concentration of industrial employment around one city or cluster of geographically adjacent cities (see, e.g. Cowie & Heathcott, 2003). Transposing these cases to agriculture, we obviously get the picture of agroholdings dominating and sometimes monopolising regional agricultural employment. Regional and even national repercussions of the bankruptcy of a single agroholding, when 6,000 people in one province lost their jobs, are analysed in Uzun (2020).