INFLUENCE OF THE MODERN AGRICULTURAL POLICY IN RUSSIA ON

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1 INFLUENCE OF THE MODERN AGRICULTURAL POLICY IN RUSSIA ON AGRICULTURAL ENTERPRISES DAVID EPSHTEIN ABSTRACT The article analyses the results of development of agricultural enterprises of the country in The conclusion is made of dual character of the development. On the one hand, there is unstable growth and fast reduction of the resource potential, which is caused by insufficient level of support and corresponding dropout of weak enterprises. On the other hand, there is significant growth of production efficiency, decrease of its resources consumed per a production unit. Enterprises with relatively smaller amount of resources get in the group of most efficient enterprises more and more frequently. Detailed analysis throughout the Leningrad region confirms these conclusions. Suggestions are made on perfection of the agricultural policy. Keywords: agricultural policy, large agricultural enterprises, efficiency INTRODUCTION In the article, we would like to examine some results of development of agricultural enterprises for the period of , which was a post-crisis period during which the national economy experienced significant growth and achieved macroeconomic stabilization. In the first place, we shall examine these results on the basis of performance of agricultural enterprises for the whole country, and then by the example of enterprises of the Leningrad region, which is one of the leaders in the country in terms of farming intensity. We shall specifically evaluate the change of resource potential of agricultural enterprises and the change of efficiency of resource use. Agricultural performance of the stated period essentially depended on the agricultural policy of the state and, in particular, on the scope size and forms of state support. Thus, significant changes of the agricultural policy took place in 2006, which we shall discuss hereafter. North West Institute for Agricultural Economics, St. Petersburg. Russia. epshtein@de1150.spb.edu.

2 2 Poster Paper presented at IAMO Forum 2008 METHODS Methods of statistical analysis, a method of production functions, a method of grouping will be used. One has employed the economic - statistical method and plotting of Cobb-Douglas production function with neutral technical progress on the basis of panel data of agricultural enterprises of the Leningrad oblast for DATA The source of data was the state statistics for , as well as data on the agriculture of the Leningrad oblast for , annual reports of agricultural enterprises of the region. RESULTS OF THE AGRICULTURAL POLICY IN RUSSIA The essence of the agricultural policy of the Russian Federation from 1999 to 2005 can be characterized as a policy of the minimal compelled support in conditions of growing import of foodstuffs. Growth of import was stipulated by strengthening of the rouble rate and, accordingly, reduction of price of imported products. This support can be evaluated as minimal, because the scope of support is decreasing year by year 1 in terms of budget expenses and also because, as we shall see, it enables to have the average profitability level only slightly above zero. Among most significant measures of the agricultural policy, one can name the Program of financial recovery in effect since 2002 which enabled to write off penalties and fines on debts to the budget, and also to restructure payment of debts under condition of settlement of current payments. Another form of the support, which was significantly expanded, is subsidizing of credit interest rates by the state. Import quotas on poultry meat and increased taxation of raw sugar import are also used. Both measures positively affected the dynamics of domestic production. These measures of support were compelled, because otherwise we would have received absolute decline in production volume, which would have adversely affected the image of governmental decisions. 1 The actual share of expenses of the federal budget on agriculture and fishing industry was 2.7% in and 1% in The expenses on agriculture in the federal budget of 2006 were 0.6% and 1.3 % in the consolidated budget and 76% of these expenses were taken over by the regions. These support funds (110.8 billion roubles) amounted to roubles or about 24 dollars per hectare of farmlands (191.7 million hectares)

3 Influence of the modern agricultural policy in Russia on agricultural enterprises 3 Starting from the second half of 2005 and in 2006, the Government significantly enhanced its interest to agriculture, having initiated a national project Development of the agro - industrial complex, the essence of which is subsidization of long-term investments, mainly in the sphere of cattle breeding. At the end of 2006, after long-term discussions, they succeeded in passing a framework Law on development of agriculture which established some general long-term objectives and tools of agricultural policy. As one of the goals of the agricultural policy, the Law sets out maintenance of parity of price indexes on agricultural products and industrial products consumed by agriculture, but does not offer any real tools for this purpose. But the Law did not include as its objective assistance to provision of profitability of agriculture necessary for expanded reproduction. Let us get down to figures describing the dynamics of production growth (table 1) and changes of the resource potential for the analyzed period (table 2) 2. 2 With a view to economy of space, we had to omit indexes of The data available for the moment of writing the article do not enable to fill in Tables 1 and 2 with data of 2006, but we shall provide some indexes further on.

4 4 Poster Paper presented at IAMO Forum 2008 Table 1: Indexes of development of agriculture and agricultural enterprises of Russia in Indexes / years Index of production of agricultural 104,1 107,7 107,5 101,5 101,4 103,1 102,4 products in comparable prices, % to the previous period Share of expenses of the consolidated 2,69 2,67 2,54 1,6 1,6 1,5 1,1 budget on agriculture and fishing industry in the total expenses, % Produced by agricultural enterprises, in million tons: Grain 47,8 55,7 69,5 69,3 51,4 56,4 54,1 Sugar beet 13,9 12,7 12,9 13,6 15,9 17,8 16,6 Cattle and poultry in dressed 1,6 1,7 1,8 2 2,1 2,2 2,3 weight equivalent Milk 15,6 15,2 15,5 15,9 15,3 14,3 13,9 Poultry meat* 0,70** 0,88 0,95 1,04 1,19 1,38 Eggs 23,2 24,1 25,1 26,3 26, ,5 Profitability of agricultural enterprises, 8,2 6,3 9,3 1 2,7 6,4 8 % Effective debt at the end of year, 184,8 229,2 278,2 322,2 354,3 374,2 425,2 billion roubles Effective profits of agricultural 13,0 13,4 26,3 3,5 11,7 41,8 34,8 enterprises on sales of products before taxation, billion roubles (with subsidies) Ratio of profit before tax to effective 7,03 5,85 9,45 1,09 3,30 11,17 8,18 debt, % Sales revenues of agricultural 175,3 231,6 298,5 316,8 361,9 432,1 492 products, billion roubles. Ratio of profit before tax (with 7,4 5,8 8,8 1,1 3,2 9,7 7,1 subsidies) to sales revenues, % Budget subsidies and compensations 9,6 8,9 12,9 15,0 16,8 20,3 25,5 attributed to financial result, billion roubles. Volume of import of foodstuffs, in roubles at the Central Bank rate, billion roubles. 218,7 208,4 277,3 330,5 356,3 385,7 501,2 Price index of agricultural products, % 199,8 136,5 125,2 103,2 108,6 127,9 103 Price index of industrial products and 161,0 148,5 118,1 112,2 118,6 124,7 113,4 services, used by agriculture, % Average monthly salary in the agricultural sector, roubles Average monthly salary in the ,5 8554,9 economy, roubles Minimum living wage of one employable person, roubles Ratio of salaries at agricultural enterprises to salaries in the economy, % 41,3 40,1 40,3 40,2 38,9 41,4 38,8 Notes: * - all farm patterns, ** - average for

5 Influence of the modern agricultural policy in Russia on agricultural enterprises 5 Unstable growth rate of and low production profitability (which has been from 2 % to 8 % for the last years) are evident. Production output of grain and milk is decreasing. The ratio of profits of enterprises to effective debts is not growing and does not allow to count on reduction of debts. Imports are growing at the rate outstripping the growth of sales revenues of agricultural enterprises. It is evident that the growth rate of salaries at agricultural enterprises is slower in comparison with the average salary in the economy. The average salary in the agricultural sector is only 10 % above the minimum living wage. The share of subsidies and compensations in the budget expenses is decreasing quickly. In 2006, the gross output of agricultural products grew by 1.3 %, 78.6 million tons of grain were harvested, which is practically at the level of The gross output of potatoes and sunflower exceeded the level of 2005 by 1.1 % and 1.6 %, sales of cattle and poultry by agricultural enterprises grew by 9 %, milk - by 0.6 % 3. However, import of foodstuffs grew by 24% in 2006, which is far above the growth rate of the domestic agribusiness industry. 3 Russian Statistical Yearbook Russian Statistical Committee, Moscow, 2007.

6 6 Poster Paper presented at IAMO Forum 2008 Table 2: Indexes of the resource potential of agricultural enterprises Indexes / years Number of agricultural 27,3 27,6 24,8 24,2 22,1 20,6 19,0 enterprises at the end of year, thous. Average annual number of 5,1 4,7 4,2 3,8 3,3 2,9 2,5 persons employed at agricultural enterprises, mln. persons. Farmlands of agricultural 152,7 149,7 146,1 142,6 140,2 134,8 130,9 enterprises, mln. hectares Cultivation area of agricultural 73 69,1 66,4 64,6 58,3 55,4 51,4 enterprises, mln. hectares Cultivation area in agriculture, 88,3 85,4 84,7 84,6 79,6 78,8 77,5 mln. hectares Livestock, mln of heads: cattle 17,3 16,4 15,7 14,9 13, ,9 cows 6,9 6,4 6 5,6 5,1 4,8 4,2 pigs 9,6 8,2 8,4 9 8,1 6,9 7,1 Index of physical volume of investments in comparable prices, % to the previous year 88,5 104,9 117,1 117,7 100,6 112,1 105,8 Production capital funds of agricultural enterprises, mln. roubles Current assets of enterprises at the end of year, mln. roubles Arithmetic mean of indexes of 1,804 1,425 1,2165 1,077 1,136 1,263 1,082 price growth of agricultural products and industrial production facilities Index of price growth of current 1,804 2,571 3,127 3,368 3,826 4,832 5,228 assets against 1998 (progressive total) Current assets in comparable prices of 1998, mln. roubles * Fixed assets in comparable prices of 1998, mln. roubles ** Notes: * - calculation made on the basis of deflation of the amount of current assets by arithmetic mean of indexes of price growth of agricultural products and industrial production facilities; ** - calculation made on the basis of deflation of acquisition of fixed assets by price index of production facilities in the current year. It is evident that alongside with unstable and low growth rates (1.5 % % since 2002), in comparison with the average growth of incomes of population, we observe steadily high rates of decrease of the resource potential of agricultural enterprises. The number of employees went down by more than twice from 1998 to 2005 and continues to go down at the rate of more than

7 Influence of the modern agricultural policy in Russia on agricultural enterprises % per year, the area of farmlands decreased by 15.5 % these years, or by 24 million hectares, the cultivation area of agricultural enterprises - by 33 %, or by 25.3 million hectares. The cultivation area of all kinds of agricultural producers also decreased by 14% or by 15.5 million hectares from 1998 to Current assets in comparable prices of enterprises of the Ministry of Agriculture considered by statistics, decreased by 7.5% by the end of 2005 in comparison with Despite the growth of investments, fixed assets in comparable prices of 1998 decreased by 43.3 % by the end of 2005 by our estimate based on deflation of the amount of acquisition according to the price growth index of production facilities. Starting from 2001, a number of agricultural enterprises has been decreasing at high rates (up to 10 % per year), and, as wee can see, their resources are not transferred to other enterprises. Thus, in many important directions there is a fast decrease of the resource potential of agricultural enterprises with obvious social losses. It is obvious that development of agriculture as a result of the agricultural policy of minimal compelled support realized up to 2006 can be characterized as unstable, leading to fast decrease of the resource potential, and also tending to decrease of production volumes, especially evident in production of grain, milk and cattle meat. Only the branches which received state support in the form of import quotas or high customs duties (poultry, sugar beet) have a steady up-trend. Profitability of agricultural enterprises is low, which is fraught with decline in agricultural production. Now let us get down to the situation with decrease of expenses, having in view estimate of expenses in comparable prices instead of current prices. In view of the preceding long period of advanced price growth of production facilities in comparison with prices of agricultural products (disparity of prices), one can expect that remaining agricultural enterprises will somehow adapt to these conditions and have managed to reduce expenses per unit of gross product in comparable prices. Our calculations have confirmed this hypothesis (table 3). 4 In 2006 the cultivated area of enterprises decreased by 6,4%.

8 8 Poster Paper presented at IAMO Forum 2008 Table 3: Dynamics of the prime cost per unit of gross agricultural products in comparable prices of the previous period in Russia in Prime cost of unit of gross agricultural products of the Russian Federation Source: own calculations in % 1998 in % 1999 in % 2004 in % 2005 in % to 1990 to 1995 to 1998 to 1999 to We can see that in 1999 agricultural production could reverse the upward trend in costs per unit of resources, partly due to devaluation of rouble and reduction of salaries, and then proceeded with raising production efficiency at very high rates (over 5 % per year). Thus, the result of the policy of the minimal support is dual - on the one hand, large losses of the resource potential and on the other hand - positive result in the form of significant growth of production efficiency. At first sight, this result throw discredit upon necessity to increase the scope of support production is gradually going up even with the current level of support. But it is clear that this insignificant growth takes place primarily in a relatively small group of most powerful farm businesses (not more than 20 % of all farm businesses). The greater mass of profits is also received by a minor part of enterprises. Thus, three hundred enterprises (1.6 % of the total) which, according to the rating of the Institute of Agricultural Problems and Computer Science (VIAPIN), belong to Club 300, in 2005 produced 25.2 % of all commodity output and received 75 % of the total amount of profits 6. Thus, we should clearly understand that reduction of expenses is a result of competition, and not of minimization of support. Enterprises of the EU countries achieve similar results under conditions of support, which guarantees them profitability of %. Given more substantial support, in particular, support of investments, enterprises could rapidly implement advanced technologies which would give even greater effect and without loss of fixed and current assets. Next, let us look at how the federal agricultural policy and the agricultural policy of the administration of the Leningrad region have affected the resource potential and efficiency of agricultural enterprises in the aggregate. 5 The method of calculation is described in the article Epstein D.B Lubkov A.N

9 Influence of the modern agricultural policy in Russia on agricultural enterprises 9 RESULTS OF THE REGIONAL AGRICULTURAL POLICY BY AN EXAMPLE OF FARM BUSINESSES OF THE LENINGRAD REGION The Leningrad region (the Leningrad Oblast) gives an example of results of the agricultural policy at the level of regions it is one of the best in terms of efficiency of development of cattle breeding at agricultural enterprises. The agricultural policy of the Leningrad region, the effect of which we analyzed by the data on economic and financial conditions of enterprises for the period from 2001 to , also answers the definition of minimal compelled support. During this period, subsidies of the Federal government of the Russian Federation did not exceed 0.9 % of the amount of sales revenues of agricultural enterprises of the region, and subsidies of the government of the Leningrad region made about 2 % of sales revenues. The government of the Leningrad region confines itself to minor subsidies most part of which goes to relatively powerful farm businesses. However, weak farm businesses receive a certain share of the support too. For example, there is a program of support of weak farm businesses in unfavourable North East districts. The Leningrad region participated in the program of financial recovery. No measures are taken in the Leningrad region to limit development of the market. The agriculture of the region is crucially influenced by demand for foodstuffs of the population of St.-Petersburg, which is constantly growing during this period (in connection with income growth), and also by competition on the labour market of city industrial enterprises with high salaries. An influential factor is also competition of the neighbouring regions (Vologda, Novgorod, the central part of Russia), which also produce milk, poultry, vegetables, and competition of imported milk, meat and vegetable products. Absence of commodity grain, sugar beet, sunflower makes this region uninteresting for investments on the part of large agro-holdings. Therefore, the majority of agricultural enterprises of the region have to use their own capital investments and borrowed bank capital. How did the above-mentioned stable situation (with relatively weak support and high import competition) influence the efficiency of enterprises?! The number of workers of agricultural enterprises according to the summary report of the Committee on agribusiness 7 During work about this paper the detailed data of each enterprise only till 2004 were accessible. It caused a choice of the period for comparison.

10 10 Poster Paper presented at IAMO Forum 2008 industry of the region for the period from 2001 to 2005 decreased by 37.6 %, and the number of worked man-days - by 33.5 %. The area of farmlands decreased by 21.1 %, the cultivated area - by 23.4 %, availability of irrigated lands decreased by 65 %, drained lands - by 16 %. The number of tractors (as of the end of the year) decreased by 33 %, and freight vehicles - by 14 %. Considerably fast reduction of the resource potential of agricultural enterprises (they produced more than 60 % of the total agricultural output in 2005 in the region comparing with the average level of 41.2 % countrywide) is evident. At agricultural enterprises, according to annual reports, sales of agricultural products in comparable prices of 2001 exceeded in 2004 the volumes of 2001 by 26.1 %, but almost all the increment was achieved due to growth of sales of vegetables cultivated on protected ground, cattle meat, milk and poultry. The gross output of agricultural enterprises remained in 2005 at the level of In 2006, the gross output of agricultural enterprises of the region increased by 4 %, mainly due to growth of milk productiveness (by 5 %). Comparison of resource costs and production yield according to the annual summary report of 2001 and 2004 in comparable prices of 2001 gives the following results which are very important, in our opinion: total expenses (total production cost in comparable prices) decreased by 9% for three years, and the total production yield (sales volume in kind, measured by average prices of 2001 in the region) increased by 26.1 %, and the production yield per unit of resources grew by 38.6 %. Thus, the result in the Leningrad region also turned out to be dual, as well as in the Russian Federation as a whole. On the one hand, the number of agricultural enterprises and labour and land resources used by them decreased considerably. On the other hand, efficiency of use of resources essentially increased. Table 4 below presents data on how much the number of enterprises producing certain kinds of products decreased, and how much production concentration of these kinds has increased 8. 8 Since the production volume for the mentioned period has not decreased, the provided results actually characterize the growth of production concentration in a smaller number of farm businesses.

11 Influence of the modern agricultural policy in Russia on agricultural enterprises 11 Table 4: Growth of production concentration in in the Leningrad region Products Number of manufacturers (farm businesses) Number of largest manufacturers, with total output of 50% or more than 50% Grain Potatoes Vegetables Milk Processed milk products In order to evaluate the growth of efficiency of the remaining farm businesses, we have carried out a data analysis for several years (panel data analysis) for the total of 126 farm businesses operating in 2001 and Using the least-squares method we have constructed a Cobb- Douglas production function of production yield by 6 factors (see below) for the total of with data converted to prices of 2001, and with the time factor (neutral technical progress). The form of production function is an ordinary Cobb-Douglas function for a dependent variable Y with an independent time factor t and a stock vector X: Y (X, t) = Ce at X b where a and b - required parameters of the function. The production yield was calculated as the total of all volumes of sold products in comparable prices of 2001, which are unified for all farm businesses. The equations have shown essential increase of technical efficiency for 2004 in comparison with 2001, with the rate of more than 6 % per year (see table 5 below).

12 12 Poster Paper presented at IAMO Forum 2008 Table 5: Factors and statistical estimation of the production function of the Leningrad region for Variable Regression coefficient Standard error T- criterion Significance Absolute term LN (labour, average annual number of employees, persons) LN (material costs net of fodder cost, thousand roubles) LN (Cost of machines, equipment, transport, thousand roubles) LN (farming area, hectares) LN (amount of fodder concentrate, thousand fodder units) LN (Amount of other fodders, thousand fodder units) Т - time, year N 252 number of degrees of freedom 7 R F - criterion Durbin-Watson statistics (Durbin-Watson-criterion) Standard error This efficiency growth exceeded the average Russian efficiency growth, which helped agricultural enterprises maintain profitability even with relatively high disparity of prices. The sum of factors with factors-resources even without taking into account the time factor is 1.075, which means that an essential scale effect takes place. Due to technical progress, the production yield grows not less than by 6 % per year. However, it is necessary to consider that these calculations are made not for all 160 enterprises, but only for those 126 farm businesses for which there were all variables required for calculations, which probably overestimates growth of actual efficiency for the total of farm businesses. The following conclusion can be drawn with regard to the agricultural policy of the region: in the region of the big city and with growth of personal income, even in case of minor support, but with a stable and clear policy, agricultural enterprises provide essential growth of efficiency, however, significant losses of the resource potential take place due to absence of support. In the

13 Influence of the modern agricultural policy in Russia on agricultural enterprises 13 Leningrad region, these losses are compensated by growth of production efficiency; however, a part of this growth is caused by dropout of financially weak enterprises. CHANGES IN DIFFERENTIATION OF FARM BUSINESSES IN TERMS OF FINANCIAL SOLVENCY In , we carried out researches for analysis of differentiation of farm businesses by the degree of their financial solvency based on the data of A special algorithm was developed, which enables to divide farm businesses into 5 groups, which differ qualitatively by the level of financial solvency. This algorithm allows to identify groups, which are qualitatively different by the level of financial - economic conditions and survival methods 9. In 2007, we carried out a similar research based on the data of and compared changes which took place in the structure and dynamics of the groups from 2001 to It is necessary to take into account that the total of agricultural enterprises in the Leningrad region is non-uniform, because, alongside with ordinary enterprises, it includes a significant number of industrial-type enterprises, such as integrated poultry farms, hothouse plants, fur farms. Transfer of one large integrated poultry farm from one group into another can significantly change average values of the groups. That is why we made calculations for rather homogeneous total of "ordinary" enterprises (production of milk and meat, also vegetables and/or potatoes, nonindustrial type), having excluded integrated poultry farms, hothouse plants, fur farms, and also pig and cattle fattening enterprises on the industrial basis. It turned out that in 2001 grouping of ordinary enterprises identified the effect of scale efficiency, whereas in 2004 the most effective group in terms of amount of assets and number of workers appeared below the average of the total. Enterprises of the first (best) group are close in terms of amount of their resources to the average ones of the total and essentially smaller than enterprises of the second and third groups. Let us refer to the percentage ratio of the groups (table 6) Epstein D Unfortunately, we had to be limited to the data of 2004, because after this period St.-Petersburg Statistics Committee does not have at its disposal such a detailed set of returns of farm businesses.

14 14 Poster Paper presented at IAMO Forum 2008 Table 6: Comparison of groupings of "ordinary" agricultural enterprises of the Leningrad region by financial status in 2001 and 2004 Groups in % in % Number of % of the total Number of % of the enterprises enterprises total ,36 9 6,87-0, , ,32-3, , ,30-2, , ,03 0, , ,48 6,01 Total , ,0 0 It is obvious that the share of enterprises of 4-th and 5-th groups has increased in the aggregate by 6 pct, from 37.4 % in 2001 to 43.5 % in Accordingly, the share of enterprises of the first two groups decreased from 29 % to 25.2 %, which means that not more than 25 % of enterprises have relatively stable financial position. And the share of the second group decreased by 3.1 pct, and the share of the third group - by 2.4 pct. The analysis of basic parameters of groups in 2004 showed that the most efficient group is no longer the largest in terms of sales revenues, number of workers, amount of fixed and current assets and farming area (a table with parameters of the groups is omitted to save space). Sales revenues of the first group are lower than the average of the total of farm businesses. Due to the change of the branch structure of the first group in comparison with 2001, the average sales revenues in the first group turned out to be twice less than in 2001, though other groups went up considerably in terms of the average volume of sales revenues. In terms of number of workers the first group in 2004 is below the fifth group (153 persons against 156 in the fifth one and 197 in the average of the total), in terms of average salary it also essentially lags behind all the groups except for the fifth one. The first group showed the least capital addition in comparison with 2001 and for 2004, and in terms of cost increase of machines, equipment and vehicles it lags behind all the groups except for the fourth one. But as a result of such a thrifty financial policy, this group is in the lead by key figures of economic efficiency (labour productivity, profitability, coverage ratio, return on rouble of land and funds, etc.).

15 Influence of the modern agricultural policy in Russia on agricultural enterprises 15 Thus, the year of 2004 drastically differs from the year of 2001, when the first group was in the lead by the amount of all basic resources. In 2004, the second group turned out to be in the lead by the amount of resources, but its rate of resource gain is also lower that in the third and fourth groups. It can be explained by mutual influence of two factors: firstly, by the fact that enterprises of the second group actually began to increase their resources more sparingly, and, secondly, by the fact that the second group includes small-scale enterprises with minor potential of resource growth (funds, workers). Thus, what happens to "ordinary" enterprises of the Leningrad region (and we have predicted that earlier 11 ) is that relatively smaller enterprises, which are close to average-size enterprises by the amount of resources, gradually pull ahead in terms of economic efficiency. That does not mean that the positive scale effect ceased to operate completely in 2004 (the second group outstrips the other ones in terms of resources), but there are counteracting factors. The second important conclusion is that for the past three years the financial condition of ordinary agricultural enterprises deteriorated considerably, both in terms of profitability rate and debt load, in particular with regard to the ratio of the gross profit to the amount of short-term debts. Briefly speaking, basic results of influence of the policy of minimal support on ordinary agricultural enterprises of the Leningrad region are the following: the number of workers of enterprises goes down, the number of enterprises decreases, their profitability declines, and relative debt load goes up, although there is essential growth of efficiency. CHANGES IN THE AGRICULTURAL POLICY SINCE 2006 In 2006, positive changes were envisaged in the agricultural policy, first of all, due to sharp increase of funds for subsidizing of interest rate for implementation of Priority national projects of development of cattle breeding, small business forms in agriculture, provision of young families and young specialists at villages with affordable accommodation. It clearly brings results, however it does not exhaust problems of agriculture of the country. Measures of 11 Epstein D., Schulze E

16 16 Poster Paper presented at IAMO Forum 2008 regulation of food markets are required, which would not copy methods of regulation of developed countries, which face problems of reduction and restriction of production 12. In our opinion, for correspondence of the agrarian policy of the country to modern tasks the following basic changes should be accepted: 1) The amount of expenses for the support should be determined on the basis of objectives of providing conditions for expanded reproduction of foodstuffs and increase of competitiveness of products, including the world market competitiveness; 2) The minimal amount of support can be determined as necessary for achievement of price parity of agricultural and industrial products, and we determine the parity as equality of conditions of various industries for expanded reproduction. According to our estimate, in conditions of , the amount of support of agricultural enterprises only should be from 45 to 50 % of sales revenues in actual prices at the existing level of price adjustment; 3) Forms of support should provide for profitability necessary for expanded reproduction in commodity production areas and also approximation of salaries in agriculture and in industry, but at the same time one should minimize the distorting influence on market prices of products; 4) Regions should have sufficient funds for development of rural areas and also for support of agriculture with help of measures, neutral to the price level; 5) The level of protection of the domestic market from import should be determined by internal purposes of the agricultural policy. It is expedient to legislatively divide types of agricultural products into three categories: those which are traded on the single federal market, whereby production of these items should be regulated and supported at the federal level, for example, grain is a product of federal responsibility, also sunflower seeds, 12 The cheap credits to the numerous producers of poultry and pigs in conditions of the non- regulated market can result in sharp fall of the prices of products, which will not allow producers in time to return the credits.

17 Influence of the modern agricultural policy in Russia on agricultural enterprises 17 those which are traded mainly on regional markets due to insufficient transportability, there are and they should be regulated at the regional level - products of the regional level of responsibility, for example, an essential part of vegetables, potatoes, those which currently (and within nearest 10 years) cannot be unambiguously referred to the federal or regional level - products of the joint responsibility, for example, sugar beet, milk, meat. Measures of price adjustment through market methods should be applied to products of federal responsibility, but regional support of selling prices should be excluded. Regional support is a matter of scientific and technical assistance, contribution to investments and other measures referred to the green basket, social assistance, support of development of rural areas. REFERENCES LUBKOV, A.N. (2007): S presentazii reytinga kluba (From the presentation of the club rating), Ekonomika selskokhosaistvennyh i pererabatyvajushchih predpriatiy (Economics of agricultural and processing enterprises), no.1, 2007, pp EPSTEIN, D. (2005): Financial Performance and Efficiency of Corporate Farms in Northwest Russia. Comparative Economic Studies, Vol. 47, No. 1 (March 2005), pp EPSTEIN, D., SCHULZE, E. (2005):. Est li dva pika rentabelnosti sel khospredprijatiy? (Are there 2 profitability peaks of agricultural enterprises?), APK: ekonomika, upravlenie, (Agroindustrial complex: Economics, Management). no , pages EPSHTEIN, D.B. (2001): Finaninansovyi krisis sel skokhosaistvennyh predprijatiy v Rossii (Financial crisis of agricultural enterprises of Russia), Mezhdunarodnyi selskokhosaistvennyi zhurnal (International Agricultural Journal), no.3, 2001, pp