Trade in Agricultural Products Between Russia and Central Asia: Trends and Opportunities Kamiljon Akramov (IFPRI) and Evgeny Tsvetnov (ECFS) Joint work with Olga Cherkasova (ECFS), Mikhail Avdeev (ECFS), and Jarilkasin Ilyasov (IFPRI) Third Annual International Conference on Agriculture, Food Security and Nutrition in Eurasia May 30, 2018 Lomonosov Moscow State University, Moscow, Russia
Outline Background Objective and approach Long-term demand for food and agricultural products in Russia Patterns of trade in agricultural and food products in Central Asia Results of traditional RCA analysis Empirical strategy and findings of econometric analysis Conclusions
Agriculture plays an important role in the region
Background There are several factors that contribute to the growth of mutual trade between Russia and Central Asian countries, including the growth of exports of agricultural and food products from Central Asia to Russia: Dietary transformation, i.e. changing composition of food consumption in Russia Changing geography of Russia s agri-food imports The presence of historical trade relations between Russia and Central Asian countries Deepening of integration processes between Russia, Kazakhstan and Kyrgyzstan in the framework of the Eurasian Economic Union
Objective and methodology The objective is to provide empirical evidence on comparative advantages of Central Asian countries in agricultural and food products and opportunities for their agri-food exports in Russian markets Empirical methodology: IFPRI s IMPACT model will be used to identify food products for which Russian demand will likely exhibit steady long-term growth Traditional revealed comparative advantage (RCA) analysis Econometrics-based measure of RCA will be used to examine comparative advantages of Central Asian countries in selected agricultural goods
GDP per capita, 1000 USD (2005) Average annual growth rate, % IMPACT socio-economic assumptions Projected population and income growth for Russia (IFPRI baseline)* Population, mln. Average annual growth rate (% per ) 2017 2050 2017-2050 Russia 142,4 136,7-0,1 * SSP2 pathway, no climate change assumptio Source: IFPRI, 2015 50 5.0 Source: Russian Federal State Statistics Service, World Bank 40 30 4.0 3.0 20 2.0 10 1.0 0 0.0 2017 2050 2017-2050
Russian food demand projections 1.2 1.0 0.8 0.6 0.4 0.2 0.0-0.2-0.4 Average annual grown in food demand, % Growing incomes and changing diets in Russia, will result in fast food demand growth for vegetables, fruits, meats and sugar. Post-2030, declining population as well as slowing income growth will largely contribute to declining food demand for all major agri-food categories, especially for oilseeds and eggs. 2017 to 2030 2031 to 2050 Source: IFPRI, 2015
Russian agri-food net exports growth Russia will maintain its position as a net importer for the following products meat, milk, eggs, fruits, root and tuber crops. Differences in 4 scenarios is minor. GFDL HGEM IPSL MIROC Source: IFPRI, 2015 Scenarios Precipitation Temperature Geophysical Fluid Dynamics Laboratory decreases decreases Hadley Centre Global Environment Model decreases increases Institute Pierre Simon Laplace increases decreases Model for Interdisciplinary Research on Climate increases increases The position of the Russian Federation as a net exporter of grain will remain in the future, with possible growth of its exports; there is also a tendency of increasing the growth of pulses, sugar, vegetables, oilseeds and oilseed processing exports
Product selection for Russia The agricultural products of Central Asia, which could be relevant for the Russian market Projected value of the Russian agri-food imports in 2050, 1000 USD (2005) Poultry 4,838,763 Milk 3,367,813 Beef 3,006,456 Eggs 1,311,530 Pork 1,208,458 Sugar 549,599 Potato 168,165 Groundnut 140,714 Soybean Meal 75,389 Horticulture products (selection based on contemporary dynamics of exports to Russia) ~5,712,101
Horticulture products selection for Russia Horticulture product Kazakhstan Kyrgyzstan Tajikistan Uzbekistan Fresh watermelons +++ + - + Fresh melons (excluding watermelons) +++ + - +++ Fresh grapes +++ ++ ++ +++ Dried grapes ++ + + +++ Fresh cherries (excluding sour cherries) ++ - ++ +++ Fresh peaches ++ ++ + +++ Fresh apricots + + + +++ Fresh plums and sloes + ++ - +++ Fresh persimmons ++ ++ - +++ Dried prunes ++ + + ++ Dried apricot + ++ ++ ++ Mixtures of nuts or dried fruits + + + ++ Dried peaches, pears, papaws "papayas", tamarinds and other edible fruits (excluding nuts,... + +++ + + Fresh apples + ++ + ++ Fresh or dried walnuts, shelled + ++ + ++ Fresh or dried lemons "Citrus limon, Citrus limonum" and limes "Citrus aurantifolia, Citrus + - - ++ Frozen fruit and nuts, uncooked or cooked by steaming or boiling in water, whether or not sweetened - + - +++ Source: Calculations, based on Trademap data
Revealed Comparative Advantage The revealed comparative advantage of a nation is measured by the relative weight of the proportion of total export of commodity s in a nation over the proportion of world export in that commodity (Balassa, 1965) K is a commodity index while j is a country index, X is export RCA kj X / X j k k j X k / j k j j k X j k
Implication When RCA>1, it means that country j has a revealed comparative advantage on commodity k. When RCA<1, it means that country j has a revealed comparative disadvantage on commodity k.
Russia - RCA for Agri-Food Exports, 2012-2016 average Sunflower (meal) Sunflower (oil) Wheat Rapeseed (oil) Soybeans (oil) Rapeseed (meal) Sunflower (seed) Soybeans (meal) Rapeseed (seed) Milk (not Milk (concentrated Soybeans (seed) Sugar (cane or beat) Apricots (dry) Plums dried (prunes) Pork (meat) Walnuts, with shell Grapes (fresh) Lamb (sheep&goat Peaches and Plums and sloes Beef (meat) Apricots (fresh) Cherries 0.28 0.14 0.12 0.09 0.06 0.04 0.03 0.03 0.02 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.78 0.76 1.37 1.21 4.28 6.11 7.38 8.00 6.00 4.00 2.00 0.00 3.87 3.25 0.38 RCA of wheat and meslin, 2012-2016 гг. 2.96 2.54 4.80 4.30 5.43 4.86 0.07 0.20 0.31 0.53 2012 2013 2014 2015 2016 1001 Wheat and meslin 100119 Cereals; wheat and meslin, durum wheat, other than seed 7.23 6.45 100199 Cereals; wheat and meslin, other than durum wheat, other than seed Source: own calculations based on UN Comtrade data and TradeMap.org The main competitive advantages of Russia are associated with the production of wheat and sunflower seeds (meal and oil). This suggests that the profiles of the competitive advantages of Russia and the countries of Central Asia, except Kazakhstan, are different. It gives an opportunity for Central Asia countries to realize their competitive advantages in Russian market. Source: own calculations based on UN Comtrade data and
Export prices for agri-food products of Russia, Central Asian countries and TOP-5 world leaders in export of this products in 2016 The export price of agri-food products of Russia and Central Asian countries with high RCA value is competitive in the global market. HS Code Kazakhstan Kyrgyzstan Russian Federation 1001 Wheat and meslin 154-166 - 229 0401 Milk and cream 466 413 535-547 1206 Sunflower (seed) 306 215 443 129 222 230630 Sunflower (meal) 190-179 - - 1514 Rapeseed (oil) 794-760 - - 080929 Fruit, edible; cherries, other than sour cherries (Prunus cerasus), fresh - 1117-831 1772 080610 Grapes (fresh) - 793 925 181 729 080231 Nuts, edible; walnuts, fresh or dried, in shell - 1387 982 209 1827 080940 Plums and sloes - 329 310 240 511 080930 Peaches and nectarines - 774 715 254 638 081320 Plums dried (prunes) 204 270 1333 231 1136 080910 Apricots (fresh) - 648 567 296 598 081310 Apricots (dry) 234 755 2437 221 1294 Tajikistan Uzbekistan TOP-5 World Russia Canada France Australia Ukraine 166 229 184 224 210 Germany France Belgium Czech Republic Netherlands 464 601 667 338 1001 Romania Bulgaria Moldova Hungary France 456 595 401 639 1147 Ukraine Russia Argentina Netherlands Hungary 229 179 151 238 215 Canada Germany Czech Republic Poland Belgium 805 851 867 853 902 Chile USA Hong Kong Turkey Uzbekistan 6795 4585 4259 2288 1772 Chile USA Italy South Africa Peru 2009 1881 1543 1430 2263 Mexico USA Chile France Hong Kong 1164 4150 2741 3707 2152 Chile Spain South Africa Italy USA 1305 1134 1273 988 1350 Spain Italy Greece USA Chile 1073 990 553 1248 1417 Chile USA Argentina France Uzbekistan 2256 3343 1858 4406 1136 Spain Uzbekistan France Turkey Italy 1596 598 2011 654 1656 Turkey Tajikistan Myanmar Uzbekistan Belarus 3667 221 207 1294 568 cells with low export volume are marked with color Source: own calculations based on UN Comtrade data and TradeMap.org
Structure of Agricultural Trade in Kazakhstan Kazakhstan agri-food exports, 2016 Kazakhstan agri-food imports, 2016 Cotton, silk and wool 4% Others 13% Meat products 3% Vegetables 3% Meat products 8% Dairy, egg and honey 8% Vegetables 4% Fats and oils 13% Cereal products 64% Others 43% Fruits and nuts 15% Sugar products 9% Fats and oils 8% Coffee, tea and spices 5%
Structure of Agricultural Trade in Kyrgyzstan Kyrgyzstan agri-food exports, 2016 Kyrgyzstan agri-food imports, 2016 Cotton, silk and wool 13% Others 13% Meat products 2% Dairy 16% Meat products 5% Vegetables 3% Fruits and nuts 7% Coffee, tea and spices 3% Others 45% Cereal products 11% Fruits and nuts 15% Vegetables 41% Sugar products 13% Fats and oils 13%
Structure of Agricultural Trade in Tajikistan Tajikistan agri-food exports, 2016 Tajikistan agri-food imports, 2016 Others 7% Meat products 12% Vegetables 9% Sugar products 9% Others 23% Meat products 6% Dairy 3% Coffee, tea and spices 2% Cotton, silk and wool 55% Fruits and nuts 14% Cereal products 3% Fats and oils 12% Cereal products 45%
Structure of Agricultural Trade in Uzbekistan Uzbekistan agri-food exports, 2016 Uzbekistan agri-food imports, 2016 Others 6% Dairy 1% Vegetables 12% Fruits and nuts 27% Sugar products 2% Others 23% Meat products 5% Dairy 2% Coffee, tea and spices 4% Cotton, silk and wool 50% Fats and oils 2% Cereal products 2% Fats and oils 27% Cereal products 37%
Geography of agri-food trade in Central Asia 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Exports Imports Exports Imports Exports Imports Exports Imports Kazakhstan Kyrgyzstan Tajikistan Uzbekistan CA neighbors Russia China EU Other countries
Geography of Uzbekistan s fruits and vegetable exports Uzbekistan Fruits Exports, 2016 Uzbekistan Vegetable Exports, 2016 Turkey 10% Other 11% Afghanistan 25% Other 11% Kazakhstan 38% China 6% Kazakhstan 58% Russia 15% India 10% Russia 16%
Uzbekistan s share in fruit and vegetable imports of Russia and Kazakhstan Uzbekistan's share in selected fruit imports, 2016 % 100 90 80 70 60 50 40 30 20 10 0 Apricots, cherries and peaches Grapes Fresh strawberries Dried appricot Russia Kazakhstan Uzbekistan's share in selected vegetables imports, 2016, % Russia Kazakhstan Tomatoes (0702) 1 55.8 Green vegetables (0709) 5.5 60 Leafy green vegetables (0705) 9.2 NA Cabbage, califlower, etc. (0704) NA 83.8 Onions, garlic, etc. (0703) NA 27.5 Cucumbers (0707) NA 72.5 Carrots, turnips, etc. (0706) NA 66.7 Dried leguminous veg. (0713) NA 71.1 Russia Kazakhstan Apricots, cherries and peaches 11.5 91.3 Grapes 7.9 84.1 Fresh strawberries 2.9 77.6 Dried appricot NA 67
0 5 0 5 Revealed Comparative Advantage in Wheat 1995-2014 0 5 0 5 10 15 20 25 Russian Federation 10 15 20 25 Kazakhstan 10 15 20 25 Uzbekistan 10 15 20 25 Kyrgyzstan Sourse: Authors' calculations using UN COMTRADE Database
10 20 30 40 10 20 30 40 0 0 Revealed Comparative Advantage in Tomato 1995-2014 10 20 30 40 10 20 30 40 0 0 Uzbekistan Kyrgyzstan Tajikistan Kazakhstan Sourse: Authors' calculations using UN COMTRADE Database
100 150 100 150 50 50 0 0 Revealed Comparative Advantage in Pitted Fruits 1995-2014 100 150 100 150 50 50 0 0 100 150 100 150 50 50 0 0 Uzbekistan Kyrgyzstan Tajikistan Armenia Chile Turkey Sourse: Authors' calculations using UN COMTRADE Database
10 20 30 40 0 0 2 4 6 8 Uzbekistan: RCA Selected Horticulture Products 1995-2014 20 40 60 20 40 60 80 0 0 10 10 20 30 0 5 0 Cabbages Root Vegetables Greens Nuts, other Grapes Fruits, other Sourse: Authors' calculations using UN COMTRADE Database
Empirical weaknesses of RCA This index compares the performance of a country in one product to the performance of a reference group of countries using export flows In doing so, it mixes up comparative advantage driven with other determinants of trade flows in approximating the RCA Good export performance can be due to several factors that not directly linked to comparative advantage Formal or informal trade barriers, demand shock, historical trade relationships, geopolitical factors Recent increase in agricultural trade between CA and Russia can be due to latest geopolitical developments Poor (unstable) empirical distribution characteristics
Econometrics-based measure of RCA Costinot et al (2012) developed a theoretically-consistent measure of RCA that isolates the export-specific factors driving trade flows It also isolates partner country and sector specific factors that may affect export trade flows
Empirical specification
Empirical specification (cont.)
Uzbekistan 0.139 0.005 14.916 9.948 13.486 5.61 2.866 24.496 25.429 2.03 24.869 10.737 Export RCA in Selected Agricultural Products, 1995-2016 Wheat Milk Tomatoes Cabbages Root vegetables Greens Nuts, other Grapes Melons Apples & Pears Pitted Fruits Fruits, other Armenia 0.007 0.003 0.055 1.047 0.652 0.275 0.018 1.179 0.097 0.5 6.529 0.091 Azerbaijan 0.014 0.017 1.693 0.022 0.07 0.275 7.549 0.049 0.059 1.847 1.342 6.213 Chile 0.003 0.074 0.045 0.032 0.024 0.177 2.828 54.056 0.052 24.673 29.226 15.184 China 0.005 0.057 0.05 0.992 1.547 0.406 0.479 0.05 0.116 0.888 0.041 0.078 Kazakhstan 9.648 0.014 0.911 0.868 0.416 0.202 0.013 0.165 3.704 0.4 0.241 0.095 Kyrgyzstan 0.234 12.646 4.109 6.059 15.318 1.221 5.297 1.896 1.234 10.446 22.131 2.057 Russia 2.763 0.061 0.001 0.006 0.005 0.084 0.081 0.004 0.038 0.01 0.002 0.077 Tajikistan 0.113 0.029 0.586 1.586 3.706 0.072 4.331 14.959 0.43 0.712 6.446 5.282 Turkey 0.137 0.123 3.265 0.167 0.98 1.197 15.117 9.479 0.546 0.61 4.812 0.337 Ukraine 7.167 0.111 0.135 0.023 0.061 0.19 1.719 0.006 0.155 0.167 0.095 0.231
Conclusions Differing competitive advantages of Russia and Central Asian countries (except Kazakhstan) gives opportunities for latter in Russian market Central Asian countries may have strong comparative advantages in selected agri-food products Kazakhstan: wheat, barley, selected oil crops Kyrgyzstan: milk, tomatoes, cabbages, root vegetables, nuts, apples & pears, pitted fruits Tajikistan: Root vegetables, nuts, grapes, pitted fruits, other fruits Uzbekistan: Tomatoes, cabbages, root vegetables, greens, nuts, grapes, melons, pitted fruits, other fruits Policymakers need to be aware of changing market conditions and price fluctuations Investment in infrastructure, marketing, branding, and improvements in SPS will help to boost comparative advantage
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