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All news / The profitability of the agricultural sector may decline in 2023

  • 08 Dec 2023, 10:46

Agricultural profitability will fall to 19.1% this year, lower than in 2022, when it reached 20.3%. Deputy Minister of Agriculture Elena Fastova announced this at parliamentary hearings in the State Duma, Interfax writes. This figure takes into account subsidies; without them, profitability is projected at 15.8%. It is expected that the share of profitable farms at the end of the year may increase to 86.7%, this value has consistently exceeded the 80% level since 2014.The profitability of the agricultural sector may decline in 2023

The deputy minister also noted that industries such as the production of cattle and lamb remain unprofitable without government support. The average profitability there in recent years has been 2.5% and 3.5%, respectively. The dairy industry also depends on government support, and its profitability for this period was 28.1%. In cereals, profit margins have been high at 41.8% over the past three years, but are expected to drop to 30% this year.

At the same time, the revenue of agricultural organizations this year is expected to reach 4.9 trillion rubles. versus 4.7 trillion rubles. in 2022, the cost of production is 3.8 trillion rubles. versus 3.5 trillion rubles. Profit taking into account subsidies this year could increase to RUB 799.9 billion. from 790.1 billion rubles. in 2022, without subsidies - up to 660 billion rubles. from RUB 634 billion respectively. Significant growth in revenue and profit has been observed in the industry since 2020.

Independent grain market expert Alexander Korbut said that profitability in agriculture has been declining for the third year in a row. “We're talking about return on sales. To a large extent, this is due to the policy that is being pursued in relation to restricting grain exports, this is an artificial reduction in prices due to grain duties. It leads to the fact that agricultural producers receive less income and, accordingly, do not have proper profitability,” the expert explained.

In his opinion, Fastova’s forecast is too optimistic, especially considering the ratio between profitability for nine months and the annual one. “The annual rate, I believe, will lose 2-2.5%, since now there are large volumes of sales of grain from the current year’s harvest, which was produced at significantly higher costs,” says Korbut. He noted that purchase prices for poultry and other types of meat from agricultural producers will also be reduced to maintain prices in the consumer market at a lower level. According to him, the loss of profitability will mainly occur in grain crops.

According to the October study “Investment map of the agro-industrial complex in Russia”, conducted by consulting companies Kasatkin Consulting and LM Investments, the total revenue of agricultural enterprises this year will reach 20.1 trillion rubles, which is 10% more than in 2022 (18, 3 trillion rubles). As the portal pole.rf reported, it is predicted that in 2024 the agricultural market will show growth of 35% compared to 2022 and by 22.7% compared to the level of 2023, while the revenue of companies in the sector will reach 24.7 trillion rubles. The growth of the industry will be ensured by the further development of food exports, primarily grains and oilseeds. Despite negative trends, such as rising costs, the profitability of the agricultural sector is quite high, analysts noted. From 2018 to 2022, on average it increased from 7.8% to 14%. Agricultural companies operate with a profit margin of 13%, food manufacturers - 8%.