Sustainable Farming Russia Memorandum

Large-scale sustainable agriculture project in North-West European Russia

Keywords:  organic, labor intensive, bio-diverse, community-focus, CSA, micro-finance, wired, open-source.

Summary:  An opportunity to bring in excess of 1 million acres of prime European farmland into sustainable, organic production using labor intensive methods and building close-knit, socially healthy rural communities.

The main goal of the project would be to demonstrate the economic and social viability of sustainable agriculture in a real, large-scale, working option superior to chemical agriculture as currently practiced elsewhere in the world.

The project would be in the form of a private, non-profit development agency which would enable small and medium-size farmers to practice bio-diverse, economically and ecologically sustainable farming over a large geographic area which would be almost exclusively farmed in this way.  The agency would provide and promote:

The more important aspects of the project are listed in the section below.   The section after that lists other relevant issues.

  1. Concept origin:  This concept was developed by a group of senior specialists in Russia working in private and non-profit sector, academia, active in promoting bio-diversity, financing and operating large-scale agricultural projects, and promoting reform in Russian agriculture.
  2. Where?  There are large areas of high quality farmland all over Russia (in excess of 50 million hectares (125 million acres)), which have experienced little if any chemical agriculture (fertilizer, herbicides, and pesticides.)   For the purposes of this project, the areas in North-west European Russia (Tverskaya, Pskovskaya, Novgorodskaya, and Leningradskaya Regions) have certain advantages.  (See attached map)
  3. Availability of funding:  This project can access special subsidized loan programs provided by the federal government, which would provide 80% of the necessary investment capital on highly favorable terms.  In non-financial language, this funding essentially amounts to a gift to investors at a ratio of 2:1.  In other words, for every $1 put in by investors, $2 is put in by the government, while 100% of the ownership of the project remains with the investor.  

The loans have a term of 10 years and are extendable, at subsidized interest rates of about 1% per annum in $US.  The size of these loans could reach $US 1 billion, however could start as low as $1 million.  A condition for receiving the loans is an investment of the remaining 20%.

  1. Support from senior government officials:  In addition to financial support, this project would enjoy moral and logistical support at a very high level, due to the organizers’ strong working relationships with senior government officials, and significant interest in such initiatives on the part of the government.  This includes the minister of agriculture, who has a serious personal interest in sustainable farming, the governors of the regions concerned, and other top-level government officials. 
  2. Sources of funding at start:  a plausible breakdown of funding sources at the beginning of the project would be as follows.  Over time, perhaps 10-20 years, once the system has demonstrated its economic viability, the government subsidized loans and philanthropy would be phased out, to be replaced by commercial debt and investment, and self-financing of expansion from ongoing operations.
  1. Heavily subsidized government loans:  80%
  2. International philanthropy:  10%
  3. Russian philanthropy:  7%
  4. Individual farmers own capital:  3% (at start – eventually to grow to majority of funding, together with points e. and f.)
  5. Commercial finance (debt and investment capital):  0%
  6. Funding from profitability of ongoing operations: 0%  (at start)
  1. Desired funding:   A project like this could be initiated with a minimal amount, for example, a few hundred thousand dollars, which would be enough to fund 1 or 2 demonstration farms.  Even smaller amounts of would allow a sustained fundraising campaign.  However, in order to get the attention of the federal and local governments and introduce parts of the program in sufficient scale, a $5-$10 million would be a desirable minimum amount.  At a loan to invested capital ratio of 4:1, this would allow for $25 to $50 million to be put to work.

Since the government loans could eventually reach the sum of $1 billion, and half of the invested capital support could come from Russian philanthropy, the upper estimate of desired capital support at start is about $100 million.

  1. Organic land:  That so much Russian land is de facto organic is a major financial advantage because it precludes the expensive step typical in the US and Europe of taking land out of chemical production, which can last several years, at high cost .
  2. Large areas where only sustainable, organic farming is practiced:   Land availability in the areas mentioned allows for acquisition of large, unified tracts, in which sustainable, organic farming could be implemented, with no, or very few exceptions.  This has significant implications for raising productivity and efficiency through shared human experience, resources, knowledge and practice, and for building communities sharing sustainable values.  It also precludes contamination issues, which are an issue in European and US organic farming.  Also, in contrast particularly to Europe, but also to the US, this prime land is largely depopulated.
  3. Labor costs:  Salaries in the rural regions in question are approximately $300/month.  This is for good quality employees, experienced in small-plot, organic, farming, motivated, resourceful, and glad to be employed in this activity.
  4. Labor intensive:  The agency would promote labor-intensive methods with the goal of achieving population density necessary to sustain healthy communities of about 100 people each, or about 20 families.  The relatively low wages make this economically viable.
  5. Land costs:   High quality land is available in these regions as property or lease at extremely low prices, relative to Europe and the US.  On average comparable land is available in virtually unlimited quantities at about $400/ha ($160/acre), compared to $30,000/ha ($12,000/acre) in Europe and the US.  This is a factor of 75:1!   This differential in price is a large part of why the impact of such a project can be so much larger in Russia than in Europe or the US.
  6. Additional government subsidies:  In addition to subsidized interest rates on loans, the Russian government offers a large variety of subsidy programs.  The agency would guarantee that small farmers receive these benefits.  They include:  
  1. co-investment in new equipment.
  2. per-liter subsidies on milk production
  3. per-kg subsidies on meat production
  4. subsidies on genetic improvements in livestock
  5. energy subsidies
  6. 0% profit tax through 2020.
  1. 1st world food prices / 3rd world land and labor costs.    Russia has a unique economic situation in the world, because despite high food prices, they have very low land and labor costs.  Many 3rd world countries have similarly low land and labor costs, but they lack the access to high-margin markets that Russia enjoys both domestically, and in Europe.
  2. Impact:   When thinking about what will really make a difference in how world agriculture is practiced, one realizes that how agriculture develops in Russia is vitally important to how it will be practiced around the world.

There are only a few regions and countries that produce most of the food in the world, besides Russia + Ukraine.  They are:  The US + Canada, Brazil, China, India, Australia and New Zealand, and Europe.  All of these practice predominantly chemical, ecologically harmful agriculture.   Russia and the Ukraine remain in a kind of time warp, a result of historical accident.   They are currently undergoing a gradual transition to the kind of agriculture that is practiced everywhere else.

Agricultural practice has a self-reproducing nature.  Once capital is invested, farmers get used to techniques, agronomic institutes teach industrial technique, large industries with vested interests grow up to support a certain method, and government officials support these methods, then it becomes very difficult and expensive to change things.  This is the case with most of the world.  

In this sense, Russia is still a blank canvas.  If one could demonstrate that sustainable agriculture can work and survive economically, and if one could measure the benefits and positive externalities in real life, on a very large scale, then this could decisively impact the choices made further in Russia and by other countries and communities around the world.  It is estimated that Russia is only producing 20% of the food it could produce.  It could serve as an incomparable source of inspiration, conviction, know-how, training, and real-life experience when confronted with the barriers and costs of switching to sustainable farming.

  1. Human resource:   Luckily, excellent quality human resources are available to power such a project.
  1. Russian urban dwellers.   The traditional farming populations on the land are not a deep resource for providing farmers, because they have been severely degraded over the past decades, and indeed, the regions being considered are seriously depopulated.  However, there exists a large resource of individuals and families interested in farming in major cities who would be an excellent talent pool.  These are often highly educated professionals, mostly with children, often with strong scientific backgrounds and knowledge of English, who are dissatisfied with urban life where they are locked into high costs, limited salaries, poor ecological conditions, and cramped living spaces.   The group who conceived of this project know of so many individual examples of people who would gladly enlist in such a project, that we have little doubt that nation-wide a substantial back-to-the-land movement would provide top-quality personnel for such a project.
  2. Foreign specialists.   Knowledge and interest in sustainable farming is very highly developed in Europe, particularly among young people, however opportunities for it are very limited due to exorbitant land costs and entrenched practice.   This group could be a substantial resource for such a project.  In particular, the opportunity to buy land very affordably would be a huge attraction to this group.  While most of such specialists would come from Europe, due to geographic proximity, substantial input is also likely from North America, Australia, and New Zealand.  This human contribution would be extremely important, because it would bring with it technical expertise and know-how.
  3. European student training programs.  Many of the leading agricultural economies in Europe have well-funded programs to send recent agronomy graduates abroad to gain experience.   This includes France, Germany, Holland, Denmark, and the Scandinavian countries.   This could also be a substantial source of expertise and some of these students might well decide to stay on after the funded programs.
  4. Russian small plot farmers.   Despite the degradation of the Russian rural population, one should take into account that there exists an enormous resource among existing Russian rural farmers, because they have been practicing this kind of agriculture for decades, and simply know how to do it, and possess invaluable local experience and knowledge.   If provided access to funding and other support services envisioned by the agency, then a nation-wide recruitment campaign would provide a large number of worthy individuals who could farm these territories.

  1. Markets:
  1. EU:   This represents a large, high-income market with substantial consumption of premium-priced organic and sustainable products.
  2. Self-feeding:  Due to the substantial population it is possible to put on the land, it represents in and of itself a large market for food.
  3. Moscow and St. Petersburg:  Both of these cities have a strong demand for healthy, non-industrially produced food and pay a large premium for it.  It is a large, existing demand, represented in existing farmers markets and internet stores.  Population of St. Petersburg is 4.8 mil and Moscow is 11.8.
  4. Local cities and regions:  In addition to the more prosperous markets of Moscow and St. Petersburg, the regions which the farms would be in or near to also amount to substantial market:  Pskov, Novgorod, Tver, Leningradskii region, and the northern half of Moscow region have a combined population of 7.5 mil.
  5. CSAs:  This is proving to be a popular distribution model in Moscow, however it remains very expensive, beyond the reach of all but the very wealthy.  The scale of the envisioned project is such that CSAs could compete with food stores.  This is a highly desirable business model because is far cheaper than the retail markup, which is quite high in Russia, and could be implemented on a large scale through the agency.  It would differ from typical CSAs in the US in that items would be selected from a group of farms, providing a greater variety of produce.  In addition, video conferencing between account managers at packing stations and consumers could further enhance the viability of this model.  There is no question that this model could compete very effectively with retail food distribution.
  6. Large branded roadside and railway stores:  These regions all have major highways and rail lines feeding to Moscow and St. Petersburg, and the heavily traveled highway and rail line between the two cities goes through this area.  Roadside stores serving travelers on these routes would provide a substantial outlet for these products.
  1. Vavilov Institute:  The institute would be an important partner and beneficiary of such a project.

Partner:  In addition to playing a key role in conceiving the project, the institute is interested in contributing farms, of which it has about 10, amounting to about 7000 hectares, which are currently under-funded.   It also has an excellent staff of 120 highly qualified, extremely dedicated agronomists who are specialists in growing the many diverse food crops the institute preserves.   These agronomists can play a crucial role in recommending which crops to grow, and how, in which crop rotations, etc.  

A fascinating aspect of the Vavilov seed collection which differentiates it from other global seed banks is that an enormous amount of scientific research has been done on the biological traits, productivity, and desirable growing conditions of the plants in the collection, data which has been collected for decades, since the 1930s.  The knowledge is focused on food plants suitable to the Russian climate :  potatoes, grains, beans, root vegetables, ground vegetables, and fruits.  This store of knowledge and human know-how is an invaluable resource which doesn’t exist anywhere else in the world.   In addition, the institute has the seeds available, and can provide them to farmers.  Finally, the institute has enormous prestige in Russia and globally, and by lending its name to the project would give it great authority, while in turn raising the profile and appreciation of the institute.  This would be particularly important in receiving government agricultural loans.  The expertise of the institute, and related institutions, also extends to livestock.

Benefits   The institute would benefit greatly from such a project because it would provide an important source of income to its agronomists, who are under-paid and in risk of being phased out.  In addition, the land the institute owns would become more valuable and productive, becoming a valuable asset.  The growing of heirloom plants from seeds is a large part of the institute’s work, as it has to reproduce them periodically when the germination life of the seeds expire.  The institute would also benefit to the extent that this work could be transferred to the farms, something that could be done on a large scale.   Not only could farms grow many of the key plants as part of their regular production, they could also help in the replanting needs of the institute as a service in return for support from the agency.

Legacy  The involvement of the institute would fit the vision of its founder, in a modern context.  Healthy food production is again being threatened, although in our age from a different threat than Vavilov foresaw.  It is eminently fitting that his life’s work: the collection, and the institution he built, could play an important role in addressing these threats.

Further reading  Two excellent books have appeared in English over the past years which explain the invaluable contribution that Vavilov made.  “The murder of Nikolai Vavilov” by Peter Pringle, and “Where our food comes from” by Gary Nabham.

  1. Enormous undeveloped agricultural potential of Russia.   It is estimated that only 20% of Russia’s food production potential is currently realized.  
  2. History of small-plot, labor-intensive, de-facto organic, family farming in Russia.  Due to its unusual economic history, Russia has a broad tradition of small plot farming which continues to this day.  In communist days, private individuals were legally allowed to sell produce at farmers markets for free prices.   These markets were enormously popular, and farmers enthusiastically grew produce for them, as it was a valuable source of income.  Productivity was enormous, and quality outstanding, because plots were legally limited in size (about 1 hectare), and tended to with loving care.  At the height of communism, fully 50% of all produce excluding grains was produced in this way in Russia, a remarkable statistic.  

The tradition continues to this day with farmers markets in every town and city.  They continue to be an important part of Russian food supply, and the quality continues to be excellent.  Most of this food was and remains de-facto organic as small farmers had practically no access to chemicals.  Paradoxically, this experience has given most Russians across all classes a good education in the difference between “real food”, and “industrial food”, and they appreciate the difference more than in many western countries.  Finally, this experience has created a large domestic demand for high quality, healthy food.

  1. The pro-organic, sustainable farming, slow food movement in Russia   It might come as a pleasant surprise to people in the west interested in these issues that these ideas enjoy substantial popular support among Russians across social and economic groups, including in the government.  

Concerns about healthy food have given rise to a vibrant community of internet stores which deliver fresh, locally grown, often organic food in Moscow and St. Petersburg.  Currently the prices are rather high and cater to upscale customers, but the market is constantly growing and prices are coming down.  The best-known of these is called Lavka-Lavka, which has a very good website profiling the farmers they buy produce from.  (in English too)

These ideas have support among small plot farmers, many Russian scientists in the biological sciences, intellectual classes in cities, and progressive, educated consumers.   There are a number of excellent Russian authors who write on the subject, and have a popular following.

The movie “Food Inc.” has been professionally dubbed into Russian and is widely known among people interested in the subject.   Russian movie download sites indicate that has been viewed a few hundred thousand times in Russia.

  1. Some advantages of doing this in Russia over other countries and regions:
  1. Non GMO
  2. Huge amounts of de-facto organic land.
  3. Wide popularity of sustainable farming ideas.
  4. Domestic financing for 80% of capital needs.
  5. High produce prices / low labor and land costs
  6. Strong academic base in sustainable agronomy and agriculture in general.
  7. Proximity to markets in Russia and Europe.
  8. Strong governmental support.
  9. Global example and significance.
  10. Size.
  11. Excellent human resources, both in Russia and from nearby Europe.

The following section lists additional relevant aspects of the project.

  1. Interest from Russian philanthropy:  The organizers have relationships with some of the largest philanthropies in Russia who could be approached about supporting such an effort.  There exists a particular interest in promoting healthy social development of rural communities. 
  2. Inexpensive energy:  Similar to the US and in contrast to Europe, these regions enjoy relatively low rates  for natural gas, fuel, and electricity.   Rates are 30-50% of what they are in the EU.  This is a big factor in making this economically competitive.
  3. Abundant water supplies:  These regions enjoy unusually abundant water supplies.  In addition to significant and steady precipitation, the region has a large amount of streams, rivers, and lakes.
  4. Reduced threat from global warming:  Due to its relatively northern latitude, long term temperature increases due to global warming is likely to lengthen growing seasons, thereby increasing yields.
  5. Pro-community:  A cornerstone of the agency’s activity would be to foster healthy communities, primarily by striving to achieve geographical proximity and population density which would allow communities to exist, and planning farm size and location to allow for planned communities of approximately 20 families each.  Efforts would be made to provide institutions for these communities to function:  i.e., schools, communications, health services.
  6. Technology and connectivity:  The agency would emphasize making available the latest technological methods and know-how.  A key part of this would be to provide high-quality internet connectivity to communities, capable of sustaining video communication good enough to demonstrate agricultural technique, diagnosing problems, remote veterinary services, etc.   Good quality mobile phone connectivity already exists in these regions.
  7. Large territory:  The availability and cost of land allows for creating very large territories which would come under sustainable farming techniques.  In the four regions listed above, this could easily amount to 1-2 million acres in relatively compact blocs.
  8. Average farm size, number of farms and communities:  (These are total guesses – need some guidance here, but suffice to say some kind of calculation of this sort should be made.)  Average farm size would be about 10 acres, with an average of 1 worker per acre.   Assuming 75% of average communities were working on the farms, and average communities of 100 individuals, then average farmland per community would be 75 acres.   At this rate, 1 million acres could support 13,000 communities, or a total population of 1.3 million. 
  9. High-profile, high quality potential board of advisors  The personal relationships of the small group who conceived of this project extend to leading personalities in Russian agriculture from all areas:  business, government, and academia.   We could quickly activate an top-quality advisory board for such a project.
  10. Products:
  1. Garden vegetables
  2. Potatoes
  3. Root vegetables – carrots, garlic,
  4. Apples
  5. Cherries
  6. Berries
  7. Juices
  8. Mushrooms
  9. Jams
  10. Artisanal grains, cereals, and bread
  11. Canned and pickled foods
  12. Baked goods, pastries, etc.
  13. Fermented beverages
  14. Arts and crafts, souvenirs
  15. Herbs, fresh and dried
  16. Medicinal plants
  17. Dairy products from cow and goat
  18. Sheep
  19. Meat, poultry
  20. Eggs
  21. Fish (cultivated)
  22. Flax oil
  23. Honey

  1. A knowledge center for global benefit:  It is well demonstrated that productivity in agriculture increases when farmers can share information, experience and know-how.  A big benefit to sustainable agriculture world-wide from such a project would be the emergence of large numbers of trained specialists with real experience, who could then share their know-how in other countries, particularly in similar climates in the US, Canada, and Europe.  By far the largest sustainable, organic farming example in the world, this project would provide ample opportunity for education and inspiration of sustainable farmers world-wide.
  2. Large scientific resource in Russia.
  3. Information and knowledge sharing among farmers in the project.
  4. Bio-diversity:   The greater variety of food available from this kind of small-plot farming would be part of its commercial appeal.   Input from the Vavilov Institute would ensure rational and scientific maximization of bio-diversity in a highly productive manner.