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'Black Sea grain' and 'super-farms' are the new threat looming for EU farmers Western European grain farmers may be facing even more severe competition than they feared from their new eastern European partners by NORMAN DUNN "Watch out, the Russians are coming!" This old warning, much-repeated in western Europe during the Cold War, is now heard more often in farming circles as grain growers nervously appraise wheat and barley crops in southern Russia and the Ukraine. For the potential of "Black Sea grain," as it is often called here, has assumed new dimensions as a menace to the market for relatively small scale producers along the western seaboard of Europe. Admittedly, western European wheat growers have always been looking over their shoulders at possible threats to their existence. After all, they produce grain in a mainly maritime climate with lots of rain and associated plant disease. Nor is there very good harvesting weather most years. This means that growing a tonne of good wheat can cost them much more than many of their global competitors. The European Union's former Common Agricultural Policy gave these growers a protected market and a guaranteed minimum income per tonne. But, before then, there were long years with the spectre of bumper Australian, Argentinean and North American harvests flooding into Europe. And, even within the EU, large-scale competition became very real when the old East Germany united with the west in 1989. Then, French and British specialist wheat growers in particular watched with apprehension as the huge Soviet-style arable farms in fertile eastern Germany swung into high production, helped by EU subsidies and new technology from the west. There were indeed a few years in the 1990s when economies of scale, coupled with very low land rent and cheaper labour, led to some great harvests and profits for those who grabbed the reins and took over large tracts of fertile land. More recently, the eastern German threat in grain production has been superseded by even newer members of the EU, particularly Poland and Hungary. Luckily for the western growers, a continental climate means drier summers and harder frosts the further east you go and, so far, the weather's effects on yields in these countries have mostly balanced out savings in labour and land costs. Another obstacle to dramatic rises in cheap grain production was, and remains, lack of capital for machinery and chemical input. There are exceptions throughout eastern Europe, of course. But farms pumped up to high production with western capital only represent a small percentage of output. Anyway, Poland and Hungary have only been in the EU for one year and already rent, labour prices and all the other main agricultural inputs are soaring in price and heading straight for the extreme levels of the "old" EU. But just a little further east, new storm clouds have been massing. Big increases in Black Sea grain are being planned, just as the EU has agreed to drop production subsidies and also increasingly open up the European market to other producers. This time, the perceived threat to the European grain growers' market is of a much larger scale. In Russia, for instance, there are former state farms or kolkhose covering thousands of acres each. Family farms exist there too, of course. But these produce only a fraction of the country's grain. While the former state farms, now running as co-operatives and limited companies, are generally struggling for capital at present, there's another class of farm in the most fertile areas that has no trouble gathering enough hard cash for investment in efficient production systems on huge units. These new farms are backed by industrial money -- especially from the booming oil and natural gas sections of the Russian economy -- and have found themselves in an ideal position to take over ailing former state farms and create single holdings that sometimes cover more than 150,000 acres. There are not a lot of these new "super-farms." It is estimated that this sector was farming from five to six per cent of Russia's fields by the end of 2004. But production from such units has been put at 18 per cent of total national agricultural output and represents 29 per cent of Russian farm sector earnings. These are the organizations that are buying western technology in grand style. Last year alone, Russia imported some 2,400 tractors and 1,141 combine harvesters. Major western firms, such as German-based combine-maker Claas, have been quick to see the new potential. This May, Claas opened a new combine factory in southern Russia and hopes to have 200 new combines off the assembly lines there in time for the coming harvest. Nor are the Russian machinery makers sleeping. Agromash, the country's largest tractor manufacturer, plans to link-up with a daughter of one of the west's top tractor makers, Agco, to produce new machines for the Russian wheat fields. Of course, Russia's agricultural output has some way to go before it reaches the levels achieved in Soviet times when the state invested huge amounts in food production at almost any price. Average grain production per harvest since 2000 is reckoned at 74 million tonnes. But Russia's Minister of Agriculture, Alexej Gordejew, says grain from the home fields should be up to estimated national self-sufficiency level of 100 million tonnes in just five years and, after that, all surplus will be for the international market. By then, the western European growers will probably be justified in fearing good growing weather in the east! BF Norman Dunn writes about European agriculture from Germany. © copyright 2005 AgMedia Inc.. top back