1^6 



impossible in the spring and fall rainy seasons. The inability to obtain 

 machinery, parts and fuel, often at any price, all make farming a real challenge. 



On the other hand, I found the massive state-owned enterprises, even though 

 run down and inefficient, were still in control of storage, processing, marketing, 

 and input supply monopolies, and enjoy government credit. Private farmers face 

 harassment and bureaucratic obstacles from conservative politicians and collective 

 farm managers. 



Victor Chesnikov, president of Akkor in Ivanovo (the association of Private 

 Farmers), told me the main problem private farmers face is one they have no 

 control over. It dwarfs all the other problems in scope and magnitude. This is 

 Russia's monetary system . He said even though he loves President Boris 

 Yeltsin, on January 1, 1992, he lifted price controls on most goods except basic 

 food items and fuel. He said this will cause far reaching effects in all segments 

 of the Russian population. Indeed it has; in 1992 inflation exceeded 2,000 

 percent. The inflation rate is now at 25% a month, the gross national product is 

 down 20%, and living standards are off 50%, and I am convinced things will get 

 worse before they get better. 



The government still controls prices on basic staples such as milk, meat, and 

 bread. These are the principal produce of most private and government owned 

 farms. To make things even worse for the farmer, there are no price controls 

 on the goods and services they must purchase. This has caused a 

 cost-price-squeeze for the farmers that is not only leaving them without a profit; 

 it is also taking away incentive. 



Many farmers, from both private and state farms, told me the FOOD America 

 sends to Russia is making things WORSE for Russian farmers, and ultimately it 

 will affect all Russians, as farmers are not receiving prices high enough to 

 provide a profit. They said as long as Russian leaders know the USA will 

 furnish cheap food, this situation will continue. Several top Russian agriculture 

 officials in Moscow told me this policy will eventually hurt everyone in Russia. 

 Large state farmers are now producing less because there is no profit incentive, 

 thus there are less rubles to purchase all other consumable goods. Business 

 and industry will eventually feel the squeeze, and this will mean fewer jobs. 

 They asked me "how American farmers would Like it if Australia or New Zealand 

 would ship milk and meat to the USA at a price lower than American farmers can 

 produce it?" As an American farmer who has watched cheap lamb and dairy 

 products come in from Australia and New Zealand, I had to admit I did not 

 appreciate the competition any more than they do. 



Yet at any given time, Russian officials are in Washington seeking additional 

 credit, negotiating for added billions in agriculture loan guarantees to purchase 

 more greiin, meat, milk products, and other food items. It probably will be 

 granted. Even though all signs point to the fact, it is just a matter of time 

 before Russia begins to default on loans now guaranteed by the American 

 government. Russia's economic distress is well documented, inflation is up . . . 

 exports are down . . . and the ruble's value is eroding. According to the 

 March 1, 1993, issue of The Washington Post and the Center for Economic 

 Reform, Russian Federation, debt payments expected to come due in 1993 

 (including unpaid bills from 1992) are $40 billion. Expected revenues from 

 exports are $35 billion. 



TG.017, 3/25/93 



