Agriculture in Russia - Ownership and Farm Structure

Ownership and Farm Structure

Between 1917 and 1990, all agricultural land in Russia was in state ownership, and the transition to a market-oriented economy had to start with privatisation of land and farm assets. Russia's agricultural privatisation programme can be traced back to 1989–90, when Soviet legislation under Gorbachev allowed, first, the creation of non-state business enterprises in the form of cooperatives; and second, legalized private ownership of land by individuals (the November 1990 Law of Land Reform). While household plots cultivated by employees of collective farms and other rural residents had played a key role in Russian agriculture since the 1930s, legislation enabling independent private farms outside the collectivist framework was passed only in November 1990.

This legislation provided three means for the formation of so-called peasant farms (Russian: крестьянские (фермерские) хозяйства, krestyanskie (fermerskie) khozyaistva). One was that a member of a collective farm could claim a share of land and equipment from the collective and exit to form a small independent farm outside the collectivist framework. Another involved a requirement that collective farms turn over a portion of their "underutilized" land to the local council as a reserve for distribution to outsiders who wanted to become peasant farmers. The third allowed prospective peasant farmers to lease land from the state (and later also from other landowners). In addition to enabling legislation, the Russian government also provided subsidies for private farmers.

The Law on Peasant Farms adopted in December 1990 was followed by laws and decrees that defined the legal organizational forms of large agricultural enterprises, the legal aspects of land ownership, and the procedures for certifying and exercising ownership rights. Specifically, agricultural land was denationalized, and its ownership (together with the ownership of other farm assets) was legally transferred from the state to the ownership of kolkhozes.

The new legal environment created expectations among Western scholars and Russian reform advocates that family farms would emerge in large numbers and the large-scale collective farms would be restructured. But as it turned out, few peasants were interested in establishing individual farms, and management and operating practices inside large agricultural enterprises remained largely unchanged despite formal reorganization. The lack of enthusiasm for the creation of private farms was attributed to inadequate rural infrastructure, which did not provide processing and marketing services for small producers and also to the fear that families striking out on their own might lose eligibility for social services that were traditionally provided by the local corporate farm instead of the municipality.

The privatized kolkhoz became a “corporate farm”. These farms were legally reorganized as common stock companies, limited liability partnerships, or agricultural production cooperatives and turned over, usually in their entirety, to the joint ownership of agricultural workers and pensioners. These farms continued to operate largely as they had done under the Soviet system. Today, the term “corporate farm” is an all-inclusive phrase describing the various organizational forms that arose in the process of privatisation without involving distribution of physical parcels of land to individuals. In diametric opposition to corporate farms is the individual farm sector, which consists of the traditional household plots and the newly formed peasant farms.

The share of state-owned agricultural land decreased from 100% in 1990 to less than 40% in 2000. Privatisation of land ownership so far has not resulted in transfer of direct control to individuals, and most land privatised by the state is managed and cultivated by large-scale corporate successors of former collective farms.

Russian agriculture today is characterized by three main types of farms. Two of these farm types – corporate farms and household plots – existed all through the Soviet period (the former are basically the successors of the Soviet collective and state farms). The third type – peasant farms – began to emerge only after 1990, during the post-Soviet transition. The evolution of Russian agriculture since 1990 shows a significant change of resources and production from the formerly dominant corporate farms to the individual farming sector. During 2006, household plots and peasant farms combined controlled about 20% of agricultural land and 48% of cattle, up from 2% of agricultural land and 17% of cattle in 1990. The share of the individual sector in gross agricultural output increased from 26% in 1990 to 59% in 2005. Producing 59% of agricultural output on 20% of land, individual farms achieve a much greater productivity than corporate farms.

Shares of agricultural land, cattle headcount, and gross agricultural output
for farms of different types (in percent of respective totals)

During 2003, peasant farms accounted for 14.4% of Russia's total grain production (up from 6.2% in 1997), 21.8% percent of sunflower seed (up from 10.8% five years earlier), and 10.1% of sugar beets (3.5% in 1997). Corporate farms produced the remainder of these crops, with hardly any contribution from the small household plots. However, household plots, with a maximum size of 2 hectares (4.9 acres), produced 93% percent of the country's potatoes and 80% of the vegetables, either for family consumption or for sale in the local markets. They also produced 51% of the milk and 54% of the meat in 2003, with the rest coming primarily from corporate farms (the contribution of peasant farms to livestock production was negligible).