Russian Black Earth farming sector is in heavy debt load
Around 80% of small and middle-size agricultural companies in the region are on the verge of bankruptcy. Russian agricultural debt exceeded its annual revenue and reached 2 trn rubles. The volume of loans is already admitted to be critical, experts forecast large scale bankruptcies. Officials refer the crisis to massive government support starting from the national project launching in 2006. Crisis of 2008 complicated the farmers’ situation, they were forced to prolong credits to three years. To increase competitive advantage of the sector steady investments were needed.
The debt load of the sector was also influenced by loan rate subsidies in regard to investment projects. The majority of the last investment projects in Black Earth region were announced based on these subsidies. At the moment their future is doubtful, this kind of subsidies distribution was stopped. Banks do not tend to finance projects which expected to get government support.
The whole situation had a negative impact on banks as well. According to the Central Bank of Russia, the main reason for it – is heavy debt load of the agricultural sector. Russian Agricultural Bank (Rosselkhozbank) - the main bank in Russia that specializes in funding the agricultural sector – already has more than 100 bln rubles of arrears.
Experts still do not give unfavorable forecasts in regard to the region’s further development. On the one hand, a lot of strong players are acting here, but on the other – small companies are in difficult situation. Situation in Voronezh Region is among the worst. The market participants themselves do not demonstrate particular concern. Many of them just hope the situation won’t change for the worse.
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