FAO at EEF: Eurasian Agroexpress is gathering pace

On September 11, within the framework of the Eastern Economic Forum (EEF) in Vladivostok, Oleg Kobiakov, Head of the FAO Moscow Office, spoke at the session “Eurasian Agroexpress: New Opportunities for Trade in the Asia-Pacific Region-2023” organized by the Eurasian Economic Commission (FAO’s institutional partner), held under the slogan “The Logistics of Change”.

“Agrifood products, on the one hand, are now key in terms of food security, and on the other hand, they most illustrate logistics challenges,” session moderator Andrey Slepnev, Member of the Board (Minister) for Trade of the Eurasian Economic Commission, said in his opening speech. “These are the speed and safety requirements for delivering high-quality products to the consumer.”

“Over the past 20 years, mutual trade in food products in our Eurasian region, I mean the Eurasian Economic Union (EAEU) and our partners in Central Asia, has increased by a factor of 8.5 and has exceeded 16 billion dollars. According to expert estimates, it will double by 2035.

As for exports to third countries, if we take the pre-COVID 2019 year as a starting point and compare it with 2022, we will see an increase of 15%, that is, products worth 34 billion dollars that have been delivered outside the Eurasian Union. A large flow of food products goes to the Asia-Pacific region: oils, grains, soybeans, and recently meat products, poultry, confectionery.

This trend is gaining momentum against the background of steady growth in the production of agrifood products in the Union. Thus, the EAEU can be a guarantor of food security not only for its own population, but also for a wide range of countries.

This task is solvable only in the context of sustainable logistics. We have been working on the Eurasian Agroexpress for several years now and have made sure that this is a really effective logistics system that allows us to quickly deliver products to the consumer, reducing travel costs, time, prices.”

“How do you assess the prospects for the supply of agricultural products to the East and what support measures are currently most in demand for producers and suppliers?” The moderator of the session addressed this question to Veronika Nikishina, General Director of the Russian Export Centre (REC).

“Foreign trade of Russia, as a member state of the EAEU, with third countries accounts for about a third of the Union’s total GDP, and for individual EAEU member states, trade with these countries is more than half. For this reason, free access to export and import channels is an essential element of the socioeconomic development not only of Russia, but also of the entire Eurasian Economic Union,” Veronika Nikishina said.

“Since last year, Russia has been actively working to reorient trade investment flows to new promising partners. And if we are talking about the part of our exports that is concentrated in the agricultural sector, then in addition to the traditional goods of our exports, with which Russia has always been associated – grain, oil, we are becoming more and more exporters of high value-added products. These are ready goods of the agro-industrial complex, and their range is expanding. This includes meat products, pasta, chocolate, confectioneries and pastries.

Following the results of 5 months of this year, exports of Russian agricultural products increased by 18%. China, Turkey, Kazakhstan, Egypt, and Belarus are still among the main directions of our exports.

Five years ago, together with Russian Railways, we launched a project called Agroexpress. Last year, it transported half a million tonnes of cargo. More than half of goods were transported in refrigerator trucks. The buyers included such countries as Kazakhstan, Belarus, Uzbekistan, Azerbaijan, Iran, India and the United Arab Emirates.

Thanks to the Agroexpress business project, Russian meat, dairy, and confectionery products are delivered in transit through Kazakhstan to customers in China. Instead of 45 days by sea, cargo is now delivered in 15 days. This is a very important joint initiative. In this case, the efforts of not only Russia, but also the EAEU countries are important to ensure that logistics is seamless, since the route passes through the territories of our EAEU neighbours. Then our customers will receive a complete logistics route.

Handing over the floor to the Director of the FAO Liaison Office with the Russian Federation Oleg Kobiakov, Andrey Slepnev noted that it is necessary to remember about many aspects of food security – it is both physical accessibility and economic accessibility of food, but also such a key element as logistics.

“Food products, both agricultural raw materials and ready–to-eat products are in the top three in terms of the mass of transported goods in world trade turnover and are only slightly inferior to energy carriers and ready products,” Oleg Kobiakov noted in his speech. “According to the most recent FAO analytical note published last week, a record global grain harvest is forecast, at the level of 2021 indicators, almost 3 billion tonnes (more precisely, 2 billion 815 million tonnes).

The peculiarity of world trade is that one of the five food calories on our table has crossed at least two state borders earlier. The fact is that subsistence farming in the world practically no longer exists. Even in less developed countries, if it is possible to collect two bags of tapioca or catch two fish, then, respectively, one bag and the second fish are sold through the market.

The accelerating processes of internationalization of trade, the revolution in food processing methods have led to the fact that the transport leg in many cases becomes shorter. At the same time, the share of developing countries, including countries with incomes below average and average, has been steadily growing in food trade since the beginning of the century. The process slowed down slightly as a result of the 2007-2008 crisis, but since then the share of developing countries has been maintained at 40%, and the remaining 60% are developed countries.

FAO notes the steady growth of trade turnover within the Asia-Pacific region, including within the framework of the EAEU and the Shanghai Cooperation Organization (SCO). This is also facilitated by a number of objective factors: population growth, increased welfare, and the growth of effective demand. Finally, an important detail is that all states in the region have land borders with each other, which makes it possible to use the cheapest and most efficient railway transport.

What worries FAO about trade and logistics chains? A few years ago, we introduced and actively apply the concept of food systems, which includes all links of production, processing and consumption of food, from breeders, producers, transport workers, wholesale and retail trade networks and ending with catering and households. Throughout this chain, there is such a phenomenon as loss and waste, which often claim up to 40% of the final product. At the same time, the world produces enough edible raw materials and food products to feed the entire planet and solve the issue of hunger once and for all. To achieve this super-task, in fact, FAO was established 77 years ago. However, loss and waste do not allow us to move forward towards this goal. Transport in this case is not the biggest culprit – it accounts for about 7%. At the same time, it is this share of loss that is most easily reduced.

FAO supports multilateral processes of the development of the regulatory framework for transport infrastructure within the Inland Transport Committee (UNECE), and in recent years at an increasing pace within the Transport Committee of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). In particular, a Framework Agreement on Facilitation of Procedures for Cross-border Paperless Trade in Asia and the Pacific has been reached, and an Intergovernmental Agreement on International Road Transport via the Asian Highway Network has been concluded. All these documents were developed with the participation and support of the countries of the region, including the Russian Federation.

A Memorandum of Understanding has been signed between FAO and the Eurasian Economic Commission and an Action Plan has been developed by them. Its first stage from 2019 to 2023 is over. Transport was not previously clearly spelled out and therefore, probably, it is necessary to include this item in the new plan. At the same time, we can record good joint work on phytosanitary standards, on improving border crossing rules based on phytosanitary certificates. Similar work is planned in veterinary.”

“I can’t help but ask a question that is literally hanging in the air,” Andrey Slepnev continued. “Taking into account the forecasts for a record grain harvest, if we compare current prices, for example, with those in 2021, they are noticeably higher. How does FAO assess the problem of food inflation and food availability?”

“After the food price crisis of 2010-2011, FAO, at the request of the Group of 20, created an information system on food markets,” Oleg Kobiakov answered this question. “Within its framework, regular crop forecasts are prepared and prices are monitored for five main food groups. Last week, another FAO Food Price Index was released – the index is going down. Compared to July, it fell by 2.1%, and compared to the anti-record in March 2022, the decrease was 24%.

In general, enough food, including grain, is produced in the world. The main issues are reduced to its physical presence in places of consumption. World trade is the way to deliver food from the places where it is produced to the places where there is a need for it, and preferably at minimal expense.”

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Mya Tun Oo, Deputy Prime Minister, Minister of Transport and Communications of the Republic of the Union of Myanmar; Alexey Gusev, Minister of Trade and Services of the Republic of Bashkortostan; Alevtina Kirillova, General Director, “Eurasian Agrologistics” JSC; Dmitry Murev, General Director, “Russian Railways Logistics” JSC; Vitaly Sergeychuk, Member of the Management Board, VTB Bank; Artem Sharov, Chairman of the Board of Directors, Russian Trade Company (RTK) in China, and Alexey Raikevich, General Director, “GLONASS” JSC, also participated in the discussion of logistics in the context of world trade in food products.

Background

The Eurasian Economic Commission (EEC) deals substantively with the topic of food security, uninterrupted supply channels taking into account the interests of producers and consumers, offers comprehensive solutions and is ready to scale them.

The Eurasian Agroexpress project promoted by the EAEU demonstrates convincing results in a compressed period of time. During the first year of its implementation, the indicators that were planned to be obtained no earlier than 2024 were achieved. We are talking about more than 500 thousand tonnes of transported agricultural products and food in 2022.

The circle of partners of the Eurasian Agroexpress project is expanding, the involvement of states is growing, primarily in the Asia–Pacific region, the North-South corridor. At the same time, digital logistics technologies are developing, which are able to give transportation a truly seamless character, bring them to a competitive international level.