Consolidation in the agricultural sector: the key to sustainability and efficiency in agriculture

Merging in the agricultural sector is inevitable, a response to the decreasing profitability of global agriculture due to rising costs, says Eduard Zernin, chairman of the Grain Exporters Union. Increasing the size of farms, thanks to their efficiency, is likely to help reduce the declining profitability in the industry, so consolidation can be considered a positive phenomenon in the current situation, according to the expert.

He believes that agroholdings are the driving force behind the development of agriculture in the post-Soviet space - it is thanks to them that the agricultural sector "has not turned into a Western (large-scale) model and has preserved its profitability and investment potential within the country." Now large enterprises will have to achieve import substitution in critical areas of development, Zernin adds.

The industry welcomes the increase in the size of existing market players, but skeptically views the "flashy" presence of new investors who overpay for assets. 

"It is extremely difficult to recoup such investments, and for the business itself, this can be a disaster in terms of efficiency. There have already been cases in the market where management, in pursuit of financial investors, changed crop rotation, ignoring its scientific foundations. Profitability increased in the short term, but after a few seasons, there was a sharp decrease in yields due to the disruption of crop rotation, profitability declined, and financial investors eventually disposed of assets in agriculture."