Survival methods: bankrupt farmers will be protected by the law
The Russian Ministry of Agriculture has appealed to the Ministry of Economic Development to impose a temporary moratorium on the bankruptcy of agricultural producers who find themselves in a difficult financial situation due to adverse weather conditions, two government sources confirmed to Izvestia. This measure is aimed at protecting small farms from the sale of land to large agricultural holdings and in compliance with the doctrine of food security. President Vladimir Putin supported the initiative. Details can be found in the Izvestia article.
Weather challenges and their impact on agricultural producers
The situation in the Russian agricultural sector is worsening due to extreme climatic conditions, which have significantly reduced yields in the south of the country. The Ministry of Agriculture of the Krasnodar Territory reports the loss of crops on 23 thousand hectares and a decrease in yields by 50-80% on an area of over 260 thousand hectares, which threatens the financial stability of many agricultural producers.
As the Russian Ministry of Economic Development and the office of Deputy Prime Minister Alexander Novak explained to Izvestia, "the situation in the agricultural sector must first be considered from the point of view of applying industry regulation and targeted measures to support specific organizations."
The National Association of Turkey Producers supports the initiative of the Ministry of Agriculture, said Anatoly Velmatov, executive director of the organization.
"The agro—industrial complex differs from other branches of the national economy in that it is most influenced by climatic conditions and veterinary safety factors, which are difficult to control and which do not always depend on effective enterprise management," he stated.
The moratorium will help preserve the industry's production potential, given that only about 20% of Russia's acreage is covered by insurance, which makes agricultural producers vulnerable.
— The introduction of the moratorium will enable the affected farms to preserve production resources and human resources, resume profitable activities during periods with more favorable conditions and protect investments already made, including preferential loans from the banking sector and the state, Velmatov notes. — Bankruptcy, although it allows creditors to partially repay the funds, is not an optimal solution from the point of view of food security.
Izvestia sent requests to the Ministry of Agriculture of the Russian Federation to the office of Deputy Prime Minister Dmitry Patrushev, but at the time of publication there was no response.
Risks and concerns: long-term consequences of the moratorium
However, there are certain concerns expressed in the agrochemical industry.
The majority of consumers of their products lend by providing deferred payment until the period when farmers sell their crops, representatives of Shchelkovo Agrochem JSC say.
— In the event of a moratorium on bankruptcy, we, as creditors, face the risk of financial losses. One of the possible ways to solve this problem is to consider a crop insurance system for farmers themselves, which will reduce financial risks for all parties, the company said.
A balanced approach and a set of support measures are important.
— The introduction of a moratorium on bankruptcy of agricultural producers is an emergency measure, and it should be treated as carefully as possible, — says Roman Potekhin, Deputy Executive Director of the Agro—Industrial Union of Russia. — Of course, such a tool can stop the chain reaction of bankruptcies, save agricultural enterprises and jobs, and prevent the massive sale of land and assets. This is not only an economic issue, but also a social one.
However, according to the interlocutor of Izvestia, the moratorium is not able to solve the debt burden problem by itself. He only freezes obligations, and in a year or two farms may face an even more difficult situation: there are not enough working capital, production costs are rising, and product prices remain under pressure. There is a serious risk of a delayed crisis if the government restricts itself to this solution.
Special attention should be paid to combining the moratorium with compensatory measures: debt restructuring, subsidizing rates, and tax deferrals.
"If we consider the moratorium as part of a comprehensive anti—crisis strategy, then this measure is really capable of strengthening the sustainability of agriculture, preserving food security and supporting small and medium-sized agricultural businesses," Roman Potekhin believes.
The fate of farmers and abuse control
The effectiveness of control and prevention of possible abuse also raises certain questions.
"There is always a risk of abuse, and it cannot be ignored," says Viktor Naydenov, Chairman of the Council of the Orel Regional Consumer Union. — We are talking about farms that are really affected by the weather conditions. Therefore, the criteria should be clearly spelled out — the presence of documented losses, reduced yields, data on force majeure, and others. This will prevent unscrupulous entrepreneurs from using the moratorium to avoid obligations.
Vyacheslav Kosakov, Managing Partner of Novator Legal Group, emphasizes the legality and fairness of the processes.
"The state should create conditions for debt restructuring with interest compensation on loans so that creditors minimize losses and farmers receive a flexible payment schedule," Kosakov notes. — Unilateral restrictions on creditors' rights without the support of debtors create deferred tension in the financial system.
The problem requires a systematic solution, says Peter Korotchenko, an agrarian and Stavropol deputy.
— The decision is timely, logical and necessary, — he states. — However, it is necessary, because the work with compensation of losses of agricultural producers in case of natural hazards is poorly organized. The compensation in 2024 did not exceed 3-4% of the losses. Agricultural insurance needs to be reformed. The creation of a unified state insurance company under the Ministry of Agriculture with branches in the regions will provide reliable and fair protection against losses. This is a matter of food security.
He also warns about the danger of accumulating debts.
"Without restructuring and government support programs, the long—term effect will be temporary and non—systemic," he says. — In a year or two, the problems may worsen, especially if the weather disasters repeat.
Balance of interests
"The moratorium is an emergency support measure, and it will save land and jobs," says Konstantin Ineshin, chairman of the Ulyanovsk Regional Consumer Union. — The main thing is to give people time to recover, combining the moratorium with debt restructuring and state support.
If small farms go bankrupt, tomorrow there will be no one to grow bread, warns Alexander Maltsev, chairman of the Council of the Khakass Republican Consumer Union. Support should be targeted and temporary, taking into account the interests of banks and creditors through compensation and subsidies, he believes.
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