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Overview: changes in the industry from January 1st, 2020

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The beginning of 2020 brought a number of changes in agriculture. The changes were introduced in the following sectors: organic production, agricultural subsidies, state veterinary supervision, activity of agricultural credit consumer cooperative organisations. Besides, Russian government approved the order of goods branding in the beginning of the year. Milknews has collected major changes which came in force on 1 January 2020.

The Law on Organic Production

The Law on Organic production came in force on 1 January 2020. The document was approved in July 2018. In order to prepare regulatory base, coming in force had to be postponed for almost 1,5 year.

The law forbids agricultural chemicals, pesticides, antibiotics, growth stimulators in animal nutrition, hormones — excluding the ones allowed by Russian, interstate and international standards of organic production. Moreover, it’s banned to use embryo transplantation, cloning and genetic engineering, genetically engineered modified and transgene organisms as well as production applying genetically engineered modified and transgene organisms. Organic production excludes hydroponics in plant growing.

In addition, organic production must not be executed at the equipment used for conventional production, and it is not allowed to ship and storage organic and conventional products together. Organic production forbids the usage of packaging, consumer and shipping packs which can pollute environment or organic products. It’s banned to use polyvinylchloride (PVC is used for pipes and window frame manufacturing) for packaging, consumer and shipping packs.

It’s planned to compile a united electronic registry of organic products supervised by the Ministry of Agriculture. Only producers from the registry will have the right to receive a specialised mark “Organic”. To be included in the registry, producers’ goods should correspond to the rules of organic production.

According to Oleg Mironenko, CEO of the National Organic Union, there are several decrees which come in force alongside with the Law. The decrees were issued by the Ministry of Agriculture and they are devoted to the maintenance of organic producers’ registry and the form and order of “Organic” sign usage. Moreover, three national standards become compulsory: “Terms and definitions”, “Rules of production, processing, branding and distribution of organic products”, “Order of voluntary certification of organic production”.

The Law makes it obligatory for Russian organic producers to be certified by specialised organisations. To date, there are three of them, including Organic Expert company, which has real experience in certification of full organic production cycle. Organic producers had been waiting for seven months when the permission for certification was resumed.

Mironenko announced that in 2019, several regions approved the programme of organic production development. 10 regions approved laws and regulations related to organic products.

“Support measures vary from region to region. For example, there are subsidies in Tomsk, Voronezh, Yaroslavl, Belgorod, Krasnodar regions. However, somewhere support is connected with the number of hectares, somewhere there are subsidies on certification or procurement of bio agents”, he said.

The head of the Union highlighted that certification and branding with “Organic” sign would be possible only after 1 January 2020. “Russian organic products with all necessary marks will not appear on the shelf before 1 January 2020, as certifying organisations need time to add data to the registry, while the producers need time to manufacture new packaging. Real time when Russian certified organic products reach stores is the beginning of the 2 Q 2020”, he underlined.

As the Ministry of Agriculture informed earlier, the producers, who had been certified by international organisations before, have the right to choose whether to get additional Russian certificate or not. “Without Russian certificate, a producer is not able to use “Organic” sign and he is not included in the Russian registry. However, such producer will have no obstacles in distribution of his products branded by international marks of certification”.

According to Mironenko, two more certification companies will get accreditation in 2020. Some foreign certifying companies can also be accredited in Russia. “Thus, we hope to strengthen and expand Russian certifying market in 2020. We plan to launch some educational projects. At least two educational organisations are preparing to train inspectors of organic certification”.

Mironenko mentioned that the programme of organic seeds production was started. “We hope to see the results in the summer of 2020”.

Besides, Mironenko explained that in 2019 “we saw considerable changes in retail and preparation for organic sector development”. “In 2020, we will see separate shelves for organic products in stores and specialised promotion programmes”, he mentioned.

According to the International Federation of ecological farming, global market of organic products has grown almost by a factor of 5 – from $18 to $82 billion – for the last 15 years. Today it comprises 10 % from overall global food market. Experts anticipate organic market to exceed $200 billion by 2020.

As informed by the Ntional Organic Union, today 179 countries develop organic farming with over 2 million producers engaged in it. 89 countries have own laws on production and distribution of organic products. Annual production increase comprises 12-15%, as expected this growth will continue till 2025.

The Ministry of Agriculture claims that the volume of Russian organic market comprises 160 million euros. Taking into account Russian ploughing area potential, expansion of technology application in agriculture and growth of demand, domestic market can reach 5 billion euros by 2025.

Russian government considers that the country is able to occupy from 10% to 25% in the global market of organic products.

New system of agricultural subsidies

New subsiding mechanism starts working from 2020 in Russian agriculture. Two subsidies – stimulating and compensating – will be introduced by the decree N 1573 issued on 30 November 2019. They appear as the result of the joining of three previously existing subsidies, i.e. a milk subsidy, a subsidy for hectares and a unified subsidy.

Compensating subsidy implies budgetary assignations to support profitability of agricultural producers. It will compensate shortfall in revenue per 1 ha of area, 1 litter of milk. Stimulating subsidy will support promising regional agricultural sectors. The Ministry of Agriculture has defined sectors, including development of seed crop production primarily from soya and rape plants, greenhouse vegetables as well as viticulture, meat livestock breeding, greenhouse farming development, etc.

According to Elena Fastova, Deputy Minister of Agriculture, new mechanism will stimulate highly efficient production, regions will have an opportunity to develop the most profitable products. With the previous system, the resources were allocated for all sectors, so it was difficult to promote one of them.

In 2020, 34 billion roubles are allocated for compensating subsidy, 27 billion – for stimulating. So far more resources are aimed at compensation, but later stimulating part will be increased.

Aleksey Gordeev, Vice Prime Minister considers new agricultural mechanism to be not so simple. In his opinion it needs some improvement.

“We will make it better. This issue turned out to be a complicated one. First of all because, farming depends on weather and it is dangerous to take too strict liabilities. Secondly, there are too many agreements and contracts. It is important not to make too much bureaucracy with little effect. So, we will assess the application of new mechanism”.

Overall agricultural support in Russia will increase to 321 billion roubles in 2020, compared to 307 billion roubles in 2019. The Ministry of Agriculture expects agricultural export to comprise $24-25 billion in 2019, compared to $25.8 billion in 2018.

Authority of state veterinarian supervision

From 1 January 2020 the authority of state veterinarian supervision is transitioned to the federal level. The corresponding law was approved by the State Duma on 13 December 2019 and by the Federation Council on 23 December 2019. The law implies that state veterinarian supervision will be conducted only on the federal level. Regional veterinarian supervision is out of force.

Federal Service for Veterinary and Phytosanitary Surveillance is responsible for state veterinarian supervision.

The law empowers Russian state veterinarian inspector and other officials to provide federal state supervision, to include rules of animal or product withdrawal in order to stop infectious diseases.

Responsibilities of subsiding supervision organisations are regulated only on the federal level.

As informed earlier, administrative reform of the year 2004 led to disunity in the system of state veterinarian supervision.

The new law will allow to exclude doubling of supervising liabilities on different levels, to create transparent vertical system and establish fixed supervision activities. The law was prepared by the Ministry of Agriculture to execute President’s decree after the business trip to the Krasnodar region on 12 March 2018.

A number of problems was revealed after the monitoring of state veterinarian service in the region. The monitoring was conducted by the Federal Service for Veterinary and Phytosanitary Surveillance. “Combination of functions of paid veterinarian services and regional state veterinarian supervision has negative effect on the results of supervising activity. Precisely, the Federal Service for Veterinary and Phytosanitary Surveillance revealed cases of concealing of focuses of infectious diseases and delayed withdrawal of dangerous products”, the report said.

Besides, lack of centralised control and unified regulations of regional veterinarian services, scarcity of financing, lack of unification in the structure of regional veterinarian authorities led to disunity of regional veterinarian organisations. As a result, it became complicated to apply coordinated measures to prevent spreading of infectious diseases throughout the country.

There is no united managing vertical system thus the infrastructure of veterinarian services is getting worse. It is especially related to the laboratories which are not able to provide full modern spectrum of tests to detect possible biological and chemical threats.

Another negative factor is impossibility to check objectivity of decisions and measures on the regional level. Lack of operational efficiency in animal epidemic countermeasures in hazardous areas influences epidemic situation of the whole country. No control of goods turnover leads to spreading of infectious animal diseases threatening humans as well.

In some regions veterinarian authorities don’t have enough power and are included in other government agencies. As a result, veterinarian services are not independent enough, so mitigating tasks and making decisions with economic consequences takes too much time.

Sergey Dankvert, Head of the Federal Service for Veterinary and Phytosanitary Surveillance, posted a letter regarding the transition of authorities to the federal level. He pays attention that this transition increases responsibility of the services for the epidemic situation in the country. The Federal Service for Veterinary and Phytosanitary Surveillance in this work will rely on electronic systems of product tracking, which will be developed and improved with the time being.

Agricultural consumer credit co-operatives (SKPKs)

All Russian agricultural consumer credit co-operatives should join one of the existing self-regulated organisations from January 1.

If SKPKs fail to fulfil the requirement the Bank of Russia will demand their liquidation in a judicial proceeding. According to the Russian Central Bank, the share of participants in self-regulated organisations exceeded 80% by the end of December 2019.

Today there is maximum possible number of self-regulated organisations in the market – 24. The data regarding the newest of them was included in the Central Bank’s registry on 26 December.

Self-regulated organisations will have to develop basic standards which will be compulsory for all SKPKs functioning in the market. At the same time according to the Bank of Russia, basic standards are flexible mechanisms allowing to regulate the activity of market players, meeting their interests and cutting off malpractices.

Once the requirement comes into force, self-regulated organisations will control their members themselves, while the Central Bank will monitor their activities.

Certification of agricultural products in foreign markets

Russian government approved the rules of subsidising certification of agricultural products in foreign markets. The subsidy implies partial reimbursement of certification costs. The decree was signed on 25 December 2019 and came in force on 1 January 2020.

Russian Export Centre will carry out agent’s functions in subsidy provision, without reward payments.

The document states that certification of agricultural products in foreign markets implies a complex of works (activities), executed to estimate correspondence of the products to foreign market requirements. It includes veterinary, sanitary and phytosanitary activities, storage, tests and utilisation of test samples. Besides, it implies a complex of works for the assessment of products’ correspondence to foreign trade contract including voluntary certification of “halal” and “kosher” products.

The subsidy will be provided for an organisation to compensate a part of costs within 12 months before the date of applying with an agreement signed by the organisation (subsidy receiver), Russian Export Centre and the Ministry of Agriculture. The subsidy for one organisation will equal 50% from actual costs proved by the documents, if within 12 months before the application the organisation transported goods on the amount exceeding the subsidy by a factor of five. If product volume exceeds requested subsidy more than 10 times, the subsidy will comprise 90%.

As informed earlier, Russia plans to increase agricultural export to $45 billion by 2024. In 2019, the Ministry of Agriculture anticipates export volume equalling $25 billion compared to $25.8 billion in 2018.

Rules and regulations of commodity marking

Russian government approved the order of marking, marking rules for consumer goods manufacturing, tyres and tyre casings, photo products, perfume. Corresponding decrees are posted on the website of the Cabinet of Ministers.

In particular, perfume producers are obliged to register in the making system before 31 March 2020. Compulsory marking of perfume products, produced in Russia and imported in the country, will start in October 2020. The data on the products and turnover will be transferred to the system of digital marking. It is allowed to distribute unmarked leftovers, which were produced in Russia or imported in the country before 1 October 2020.

The participants of the photo product market should register in the marking system before 29 February 2020. Turnover of unmarked goods will be forbidden from 1 October 2020. Before 1 December 2020, turnover participants have to mark leftovers which will not be distributed before 1 October 2020.

As for the tyre market, the participants should register in the monitoring system seven days before the distribution of commodities. Production and import of unmarked tyres are banned from 1 November 2020 as well as their distribution by turnover participants working directly with importers and producers. Before 1 March 2021, all turnover participants are obliged to mark the leftovers which will not be distributed before 1 November 2020.

From 1 March 2021, all turnover participants should provide information on procurement and other tyre turnover activities to the system of digital marking. According to the document, the turnover of unmarked goods will be banned from 1 January 2021. By 1 February 2021, all leftovers, not distributed before 1 January 2021, should be marked.

“The Centre of Perspective Technology Development has elaborated a digital platform quickly adapting to new industries. 136 495 companies had been registered in the system by the end of December. Over 7.2 billion codes are being tracked. We are ready to multiple growth of registered participants. There is a specialised application “Chestny Znak” which has already conducted over 2 million marking code check-ups, the number of application users has grown by a factor of 5 for the last three months. All new groups of commodities have already been integrated in the application”, commented Dmitry Alkhazov, General Director “Operator-CRPT”, the operator of the marking system.

All pilot projects were completed on 30 November. Producers, distributors, representatives of retailing participated in pilot projects. To date, the marking is being tested in several industries.

In 2019, obligatory marking was introduced for tobacco, perfume, shoes, tyres and air-powered casings, photo cameras and flash tubes as well as five commodity groups from consumer goods manufacturing.

Drugs are obligatory for marking from January 1, 2020, dairy products – from 1 June 2020.

Two-dimensional Data Matrix code is used for marking. The code is applied on packaging or label, it contains detailed data about the product: name, producer, date, time and place of manufacturing.

Unified National System of Commodity Marking and Tracking will be established in Russia by 2024. System operator is the Centre of Perspective Technology Development, founded by public private partnership.

Besides, Russian government defined the access to the data in the system of digital marking and tracking. The decree was posted on the official internet portal of legal information.

The document, provided by the Russian Ministry of Industry and Trade, sets the rules of getting access to information on marking and monitoring and the list of open data.

Precisely, the rules differentiate two ways of access to the data: for producers and other turnover participants and for consumers and federal executive authorities.

The decree regulates the rights and obligations of information system’s operator regarding data access, content available to turnover participants. Besides, a producer will be able to find out information on a current owner of goods and their amount.

The operator (the Centre of Perspective Technology Development) explains that earlier this information was not available in one window, producers had to collect it by pieces. Due to different data in different sources the information was not always accurate, data analysis had to be applied.

The access to accurate data from the marking system will establish new growth points for turnover participants. Business will be able to receive relevant data and plan production, reduce reserves and increase turnover, improve marketing alongside with other business processes.

“Today marking system generates data about billions of goods, from production to distribution. Information on goods’ movements enables to enhance distribution efficiency and boost profit. Thus, owing to the Centre of Perspective Technology Development and its partners investment in preparation for marking will be negligible but will bring payback and additional revenue to legal companies”, commented Mikhail Dubin, Chairman of the Board, Centre of Perspective Technology Development.

Source: milknews.ru


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