Tuesday, August 15, 2017

Agriculture: On the cusp of self-sufficiency

Since Independence, India’s foodgrain production has registered an over a five-fold increase, to around 273 million tonnes in 2016-17. The country has largely attained self-sufficiency as it transformed itself from a status of ‘ship-to-mouth’ to an exporter over the past 70 years.
Despite this progress, the agriculture sector faces major challenges as yields stagnate amidst dwindling average size of landholdings and the vagaries of climate change.
The adoption of Green Revolution in the 1960s gave a major impetus to foodgrain production in the country, which then had largely depended on imports to feed the demand. The rise in irrigation cover, coupled with the adoption of improved and hybrid seeds, largely led to the increased foodgrain output.
The average yields of cereals such as rice and wheat have more than doubled since the 1970s, but are still lower than that of China or the US. The sluggish growth in yields of pulses and oilseeds still remain a concern. Cotton yields have more than doubled since 2001 with the introduction of genetically modified seeds.
The irrigation cover, which stood at around 18 per cent of the area in the early 1950s, has now inched up to over 50 per cent. Despite this, the dependency of Indian agriculture on the south-west monsoon is still high and the output is still vulnerable to any major fluctuations in the annual rainfall pattern.
The share of agriculture in the country’s gross domestic product, which stood at around 53 per cent in the early 1950s, has now come to around 15 per cent. Despite this dip, over half the population in rural India still depends on agriculture and allied sectors such as dairying and poultry among others for livelihoods.
The record food output notwithstanding, in recent years, the per capita net availability of foodgrains per day (including cereals and pulses) has been below 500 grams. As per provisional estimates for 2017, the per day per capita foodgrain availability is estimated at 485.4 grams. This is almost similar to the trend witnessed in the 1960s and 1970s. In 1961, the per day per capita food availability stood at 468.7 grams, while in 1971 it was at 468.8 grams.
The slower pace of growth in per day per capita food availability indicates a trend that production has barely kept pace with the growing population.
Though India has emerged as an exporter of food produce — mainly rice, cotton, fruits and vegetables — in recent years, the country still remains a net importer of edible oils as the oilseed production is still way below domestic demand. So is the case with pulses till recently, although production of legumes had shot up last year.
Cultivation costs
This apart, the rising cost of cultivation coupled with lack of remunerative prices has aggravated the agrarian distress and made farming unviable, at least for a large section of the small and medium farmers. Also, the issue of labour shortage and rising wages has driven Indian farmers to adopt mechanisation.
As farmers diversify from foodgrains to high-value crops such as fruits and vegetables, the adoption of technology is on the rise — be it in terms of hybrids and high-yielding varieties or the practices and techniques.
Going organic
Also, there is a renewed interest in the past few years in concepts such as organic farming. This apart, the forgotten grains such as millets — considered to be nutri-rich and which require less water to grow — seem to be finding favour among farmers as well as consumers. The demand for organic and nutri-rich foods is driving the trend.
The Economic Survey 2016-17 suggests that the response to the agrarian distress needs to be addressed by increasing productivity, mainly by increasing the coverage of water saving irrigation systems like micro irrigation systems and routing inputs through direct benefit transfer mode in a crop neutral manner.
“The controversies on the adoption of high yielding varieties and genetically modified seeds need to be resolved and extended to all crops, not just mustard,” the Survey said.

Sunday, August 13, 2017

Electric cars: The death of the internal combustion engine

HUMAN inventiveness…has still not found a mechanical process to replace horses as the propulsion for vehicles,” lamented Le Petit Journal, a French newspaper, in December 1893. Its answer was to organise the Paris-Rouen race for horseless carriages, held the following July. The 102 entrants included vehicles powered by steam, petrol, electricity, compressed air and hydraulics. Only 21 qualified for the 126km (78-mile) race, which attracted huge crowds. The clear winner was the internal combustion engine. Over the next century it would go on to power industry and change the world.

The big end

But its days are numbered. Rapid gains in battery technology favour electric motors instead . In Paris in 1894 not a single electric car made it to the starting line, partly because they needed battery-replacement stations every 30km or so. Today’s electric cars, powered by lithium-ion batteries, can do much better. The Chevy Bolt has a range of 383km; Tesla fans recently drove a Model S more than 1,000km on a single charge. UBS, a bank, reckons the “total cost of ownership” of an electric car will reach parity with a petrol one next year—albeit at a loss to its manufacturer. It optimistically predicts electric vehicles will make up 14% of global car sales by 2025, up from 1% today. Others have more modest forecasts, but are hurriedly revising them upwards as batteries get cheaper and better—the cost per kilowatt-hour has fallen from $1,000 in 2010 to $130-200 today. Regulations are tightening, too. Last month Britain joined a lengthening list of electric-only countries, saying that all new cars must be zero-emission by 2050.
The shift from fuel and pistons to batteries and electric motors is unlikely to take that long. The first death rattles of the internal combustion engine are already reverberating around the world—and many of the consequences will be welcome.
To gauge what lies ahead, think how the internal combustion engine has shaped modern life. The rich world was rebuilt for motor vehicles, with huge investments in road networks and the invention of suburbia, along with shopping malls and drive-through restaurants. Roughly 85% of American workers commute by car. Carmaking was also a generator of economic development and the expansion of the middle class, in post-war America and elsewhere. There are now about 1bn cars on the road, almost all powered by fossil fuels. Though most of them sit idle, America’s car and lorry engines can produce ten times as much energy as its power stations. The internal combustion engine is the mightiest motor in history.
But electrification has thrown the car industry into turmoil. Its best brands are founded on their engineering heritage—especially in Germany. Compared with existing vehicles, electric cars are much simpler and have fewer parts; they are more like computers on wheels. That means they need fewer people to assemble them and fewer subsidiary systems from specialist suppliers. Carworkers at factories that do not make electric cars are worried that they could be for the chop. With less to go wrong, the market for maintenance and spare parts will shrink. While today’s carmakers grapple with their costly legacy of old factories and swollen workforces, new entrants will be unencumbered. Premium brands may be able to stand out through styling and handling, but low-margin, mass-market carmakers will have to compete chiefly on cost.
Assuming, of course, that people want to own cars at all. Electric propulsion, along with ride-hailing and self-driving technology, could mean that ownership is largely replaced by “transport as a service”, in which fleets of cars offer rides on demand. On the most extreme estimates, that could shrink the industry by as much as 90%. Lots of shared, self-driving electric cars would let cities replace car parks (up to 24% of the area in some places) with new housing, and let people commute from far away as they sleep—suburbanisation in reverse.
Even without a shift to safe, self-driving vehicles, electric propulsion will offer enormous environmental and health benefits. Charging car batteries from central power stations is more efficient than burning fuel in separate engines. Existing electric cars reduce carbon emissions by 54% compared with petrol-powered ones, according to America’s National Resources Defence Council. That figure will rise as electric cars become more efficient and grid-generation becomes greener. Local air pollution will fall, too. The World Health Organisation says that it is the single largest environmental health risk, with outdoor air pollution contributing to 3.7m deaths a year. One study found that car emissions kill 53,000 Americans each year, against 34,000 who die in traffic accidents.
Autos and autocracies
And then there is oil. Roughly two-thirds of oil consumption in America is on the roads, and a fair amount of the rest uses up the by-products of refining crude oil to make petrol and diesel. The oil industry is divided about when to expect peak demand; Royal Dutch Shell says that it could be little more than a decade away. The prospect will weigh on prices long before then. Because nobody wants to be left with useless oil in the ground, there will be a dearth of new investment, especially in new, high-cost areas such as the Arctic. By contrast, producers such as Saudi Arabia, with vast reserves that can be tapped cheaply, will be under pressure to get pumping before it is too late: the Middle East will still matter, but a lot less than it did. Although there will still be a market for natural gas, which will help generate power for all those electric cars, volatile oil prices will strain countries that depend on hydrocarbon revenues to fill the national coffers. When volumes fall, the adjustment will be fraught, particularly where the struggle for power has long been about controlling oil wealth. In countries such as Angola and Nigeria where oil has often been a curse, the diffusion of economic clout may bring immense benefits.
Meanwhile, a scramble for lithium is under way. The price of lithium carbonate has risen from $4,000 a tonne in 2011 to more than $14,000. Demand for cobalt and rare-earth elements for electric motors is also soaring. Lithium is used not just to power cars: utilities want giant batteries to store energy when demand is slack and release it as it peaks. Will all this make lithium-rich Chile the new Saudi Arabia? Not exactly, because electric cars do not consume it; old lithium-ion batteries from cars can be reused in power grids, and then recycled.
The internal combustion engine has had a good run—and could still dominate shipping and aviation for decades to come. But on land electric motors will soon offer freedom and convenience more cheaply and cleanly. As the switch to electric cars reverses the trend in the rich world towards falling electricity consumption, policymakers will need to help, by ensuring that there is enough generating capacity—in spite of many countries’ broken system of regulation. They may need to be the midwives to new rules and standards for public recharging stations, and the recycling of batteries, rare-earth motors and other components in “urban mines”. And they will have to cope with the turmoil as old factory jobs disappear.
Driverless electric cars in the 21st century are likely to improve the world in profound and unexpected ways, just as vehicles powered by internal combustion engines did in the 20th. But it will be a bumpy road. Buckle up.

Friday, August 11, 2017

Zinc poised to test $3,000 a tonne with Glencore production in focus

 Zinc has been the darling over the base metals markets over the past year. It has risen 30 per cent and is set to test $3,000 a tonne, according to Evy Hambro, Blackrock’s influential mining investor. “With inventories on both the London Metal Exchange and Shanghai Futures Exchange declining to ‘price critical levels’, premiums rising and Chinese domestic supply faltering, the price looks set to test the $3,000/t level again,” said Mr Hambro in a half-year update from the Blackrock World Mining Trust, a fund he co-manages. “A key focus for the market is when Glencore looks to bring back the production it took off the market in 2015, when prices were much lower.” The Financial Times was able to put that question to Glencore chief executive Ivan Glasenberg on Thursday after the Swiss-based commodity trader and mining reported half-year results. By way of context, Glencore idled a third, or 500,000 tonnes, of zinc capacity in October 2015, in a dramatic move that was widely interpreted as an attempt to put a floor under the price of the metal, which is used to rust-proof steel. Here’s what Mr Glasenberg had to say on a possible re-start of production at Glencore’s mothballed zinc mines in Australia and Peru. “We are going to be cautious and not jump the gun,” he told the Financial Times, saying that Glencore would not add tonnes to the market it if had a negative effect on prices. Asked if he was concerned about new supply filling the gap left by Glencore’s cuts, Mr Glasenberg was dismissive, saying the company’s capacity would be needed. “People talk about new production coming [into market] but it’s really not that much,” he observed. “What’s really coming on? Gamsberg [a mine in South Africa] which is about 250,000 tonnes but then you have Skorpion [Namibia] which is leaving the market and was producing around 180,000 tonnes. Dugald River [Australia] is coming on stream in the second quarter of 2018… and not that much else. And if you look at the tonnes that have been taken out. Century [Australia] took out 500,000 tonnes and Lisheen [300,000 tonnes],” he said. Mr Glasenberg added: “With demand growth of 2.5 per cent the world is going need an extra 390,000 tonnes per year. If you do those numbers the market is going to need our tonnes soon but we will be cautious when we bring it back on,“ he said. Zinc for delivery in three months on the LME was down $19 at $2,909 a tonne on Friday.

Flipkart vs Amazon: It’s a two-horse race in India

From an online book e-tailer in 2007 to becoming India’s largest Internet firm in 2017, Flipkart Ltd can be easily termed as the “come-back” kid in the country’s start-up and e-commerce ecosystem.
Even as a few global investors had written-off Flipkart’s growth story last year, the Bengaluru-based company has raised the biggest ever investment from Japan’s SoftBank Vision Fund to make it a two-horse race against arch rival Amazon in the Indian e-commerce market, which is likely to touch $100 billion by 2020.
With the latest round, Flipkart has about $4 billion in cash reserves. The company had last raised about $1.5 billion from Microsoft, Tencent and Ebay in April and the fresh funding also gives a partial exit to Tiger Global, which was one of Flipkart’s early and largest investors till April. The funding also came in after Flipkart’s proposed takeover of Snapdeal, SoftBank’s portfolio company, was called off last week.
According to investors and experts in the e-commerce ecosystem, the funding by Softbank in Flipkart paves way for a bigger consolidation and that India will not see a monopoly in the e-commerce market unlike China and the US. There would be two big players in the market by 2020.
“We can expect some transition point, some consolidation and also some pivots in the business model,” said Vikram Gupta, founder of venture capital firm IvyCap Ventures. He also hinted that going forward there could be chances of Flipkart and Paytm, in which Softbank pumped in $1.4 billion this year, coming together as they have several synergies and use that to fight Amazon in India.
He also added that even then (if Flipkart and Paytm come together), it will be difficult to topple Amazon.
“Amazon is a strong company with a very long-term strategy. It will not be easy for Flipkart to go against it,” he said adding that the world will be ruled by artificial intelligence, robotics and machine learning, and that Amazon is way ahead of the market is using these new technologies to remain the world leader over the next 5-7 years.
Amazon has also committed around $5 billion in the India since 2014 and is likely to pump in more.
Another leading investor Ravi Gururaj was of the view that the recent funding has just made things difficult for the other global players such as Rakuten, Walmart and Alibaba to make a roadway in the Indian e-commerce market.
This will lead to more innovations coming into the market in terms of making better customer experience and also the companies would now work towards getting a better hold in the smaller towns and cities, Gururaj said adding that the consumers can now expect better deals and discounts. “Discounts and deals are likely to get back and it will be a good Diwali for consumers,” he added.
Small invesments

On Softbank’s strategy in the India and globally, experts are of the view that the bank with its $100-billion fund wants to invest smaller amounts in several growth-stage companies and want to cross leverage the companies to fight against the largest player, which is Amazon.

“It is impossible for Softbank to now invest in Amazon so they are looking at several smaller companies like Flipkart and Paytm so that atleast a few of them will give them returns like Alibaba did,” added Gupta.

Here is a list of things that millennials are killing

Millennials are killing… well, everything.
If you’ve been on the internet or social media recently, you may have noticed a trend that millennials are being blamed for cultural shifts and changes. Almost like they are a new generation of new people that might have new likes and dislikes. Who would have thunk it? They’re just crazy, these millennials.
Millennials killing things has become the favored tagline for this generation. It used to be that millennials were just lazy, or snowflakes, or expected everything to be handed to them in life. Apparently at some point within the last year or so, millennials graduated to a generational murderous rampage. In fact, it’s become so trendy to blame millennials for these shifting dynamics that it’s even become a social media meme in recent days. 
Twitter Ads info and privacyOf course, it’s not fair to blame millennials for all of this, but there has to be a scapegoat for everything. And the bottom line is this: things change, change is scary, blame millennials.
Just how many institutions are millennials destroying? The paths of their destruction knows no boundaries. Here’s a totally not comprehensive list of all the things millennials are killing.
1) The oil industry
This may not be a bad thing because at some point a generation is going to have to ensure planet earth survives.
2) The beer industry
Apparently, this is because millennials love rose wine. I’m thinking this might be a classic case of media hyperbole and over-exaggeration because as long as there are young people, there are going to be young people drinking beer. At last check, Natty Light was still in business.
3) The casual dining industry
In what could be a symbol for the crumbling of the core of American society, millennials are turning away from places like Buffalo Wild Wings and Applebees and in favor of cooking more at home or doing more fast-casual options. The horror. The horror.
4) The golf industry
Golf is more popular with boomers than millennials. So are slot machines and the AARP. Newsflash, right? Aside from Tiger Woods, I can’t think of any reason why any younger generation would find golf to be a more attractive sport or leisure activity than their elders. Golf is something you can play your whole life. It’s supposed to be more popular as you get older!
5) The vacation industry
You know how millennials have the reputation of being lazy and entitled? That exists. But at the same time, they also are “work martyrs” that don’t take enough time off in trying to work their way up the corporate ladder. And this horrible evil of “working too hard” is motivating other people to work harder to keep up with them. Will someone make up their mind in stereotyping this generation, please!
6) Department stores
Has anyone ever heard of a little thing called Amazon?
7) The movies
Has anyone ever heard of a little thing called Netflix?
8) Marriage
Over the past 35 years, the percentage of 24- to 35-year-olds that were married fell from 2/3 of Americans to 2/5 of Americans. How has eHarmony, Match.com, and Farmers Only failed us so dramatically?
9) Lunch
Millennials reportedly prefer snacks to the traditional three meals a day plan. As long as millennials aren’t starving themselves, you should just be able to eat when you want… right?
10) Focus Groups
Chalk up another win for millennials. Has anyone ever gotten anything good out of focus groups? Have you ever seen one of those horrible things Frank Luntz puts on television where random people get to say totally off-the-wall things about what’s happening in the world? Kill it. Kill it with fire.
11) Gyms
Millennials are doing more things on their own and looking for more studio style boutiques and specialized workouts. As someone who last worked out in a previous millennium, I have no joke or witty comment to make here.
12) The dinner date
If millennials are killing all of the casual dining restaurants in America, I guess this makes sense.
13) The NFL
The NFL is the most popular sports and/or entertainment franchise in America, but nothing is powerful enough to escape the wrath of millennials.
14) The McDonald’s McWrap
15) America

Has Cooking Become a Lost Art?

What are people eating? Increasingly, food that doesn’t involve a lot of cooking.
One of the biggest changes that has rippled across the food industryis a loss of cooking skills, says food historian Andrew F. Smith. This is despite the popularity of cooking shows and Instagram food photos. “Grocery shopping now is buying prepared food,” he says.
The trend is true across age groups, but is strongest among millennials, the nation’s largest demographic group. About 42% of millennials’ monthly food budget is spent on food prepared outside the home, more than any other generation, according to a survey of 1,500 U.S. consumers last year by Acosta. Millennials spent an average of $202 a month on food prepared outside the home last year, up from an average of $159 in 2015.
Baby boomers, who don’t often cook for large households, are also turning to prepared foods. Joan Shuman, a 68-year-old retired federal government employee in Eatontown, N.J., said she frequently buys prepared salads from Wegmans Food Markets Inc. to go along with her dinner.
The rise of dual-income and single-parent households too busy to cook has also fueled the trend. In today’s on-the-go culture in which people feel so pressed for time they rarely leave their desks for lunch anymore, consumers are increasingly grabbing small bites. “What we’ve uncovered is round-the-clock snacking,” Taco Bell Chief Executive Brian Niccol said in a recent interview.

When they do cook meals, they’re making them with fewer ingredients rather than filling up a cart of groceries. Meals are simpler now, often consisting of one dish with protein, vegetables and starch all mixed together. Meal composition has changed gradually over time, with dinner now consisting of 2.2 items, down 27% over the past 30 years, market research firm NPD Group Inc. says.
Subscription meal-kit services have also had an impact. NPD found that 5% of American households have used a meal kit at least once in the past 30 days and that food from the kits often stretches beyond just one meal. “That’s at least one grocery visit that didn’t happen,” said NPD food analyst David Portalatin.
“It’s easier for us to grab and go,” said Holli Kempton, a 34-year-old married community college instructor from outside of Charlotte, N.C., who prefers to get a $10 meal kit from her local Publix Super Markets Inc. store than spend the money on groceries or takeout. 
Consumers also are showing an increasing interest in stretching out their meals. Americans, on average, incorporated leftovers into meals 135 times last year, up from 124 times in 2012, Mr. Portalatin said. Even snacks are occasion to use leftovers, a Hartman Group survey found.
Part of the increasing willingness to use leftovers is that many consumers are trying to be more frugal. Mr. Portalatin said: “Millennials came of age during the recession so their economic reality was different than older, more established folks. Plus, they have some attitudes about food and beverages that are just different than previous generations.”

Back to the land: Russia’s farming transformation

Daniil Tolstoy inhales deeply as he steps on to the soft black soil. After a passing tractor disappears over the hill in a cloud of rooks and gulls, there is only the soft glint of the sun on the freshly ploughed chunks of earth and the rustle of the wind in the nearby birch grove. This is what Tolstoy’s great-grandfather, Count Leo Tolstoy, must have smelled, seen and heard in his fields not far from here more than a century ago. The renowned novelist spent the best part of his life on Yasnaya Polyana, the family estate south of Moscow, and took as keen an interest in agriculture as he did in writing. Leo Tolstoy would frequently stop work on Anna Karenina to walk with the peasants in the fields. In later years, the aristocratic author even styled himself as a farmer, dressing in the linen tunic traditionally worn by Russian peasants. He argued that everyone ought to work the land, and believed that the ills of a society built on serf labour should be cured through a return to subsistence agriculture. The Tolstoy clan fled Russia after the 1917 revolution: Daniil Tolstoy, like the vast majority of his great-grandfather’s many descendants, is a foreigner in all but name. He is a Swedish citizen, speaks with a distinct British accent and struggles with the Russian language. But now, the LSE-educated economist is following his famous ancestor’s call back to the land. He has started a farm in Russia. Through Across Invest, a Stockholm-based company with a Swedish family as its main investor, Tolstoy has founded Tolstoy Heritage. This Russian-based company has bought 5,800 hectares of fields — about 20 times the size of a normal farm in EU countries, but an average size for a commercial agricultural enterprise in Russia.  With 123 million hectares in arable land — the world’s third-largest area behind only India and the US — Russia has the potential to be an agricultural superpower. The country has 36,400 agricultural enterprises and 174,600 farmers, according to the 2016 agricultural census.  And although the broader economy has been in the grip of recession over the past two years, agricultural output has grown from Rbs4.3tn (£55bn) in 2014 to Rbs5.6tn last year — stimulated, in part, by Moscow’s embargo on western food imports, introduced three years ago in response to US and European sanctions. “We are a country that can and must feed itself,” prime minister Dmitry Medvedev said in 2014. In 2015, President Vladimir Putin went further still, claiming that Russia could become the world’s largest supplier of “healthy, ecologically clean, high-quality food”. In his annual policy address in December 2015, Putin called for a push to make the country completely self-sufficient in food by 2020.  Tolstoy says his venture won’t be just any farm, but a farm with a mission. “We are going to build the first true organic farm in the country — I want to create the Duchy Originals of Russia,” he says, referring to the organic-produce brand established in the UK by the Prince of Wales 25 years ago. Eventually, Tolstoy plans to build a house close to a picturesque lake on a sloping spot ringed by forest. “Then we can spend the weekends here, or more,” he says.  Tolstoy Heritage is just one of the enterprises trying to ride the wave of Russia’s very own food revolution. In Soviet times, Russian culinary habits were formed by what was available: Salad Olivier, a popular dish based on the recipe of a Tsarist-era French chef, was made with carrots instead of the original caviar. Long after the collapse of the Soviet Union, Moscow restaurant menus were dominated by poor imitations of sushi and spaghetti carbonara. However, that began to change in the late 2000s, when the economic boom fuelled by oil exports created an urban middle class that started to crave the same kind of fresh, healthy food it saw on offer elsewhere in Europe. “In 2011, people began to take a real interest in where their food comes from. Many of our urban residents were well travelled by then. They picked this up from Italy, the UK, Switzerland, where it was absolutely mainstream to be conscious about the origins of your food,” says Boris Akimov, founder of the farm co-operative LavkaLavka. Akimov, a burly 39-year-old with a thick beard, is one of the pioneers of the farm-to-table movement in Russia. A decade ago, while writing restaurant reviews as a journalist on the Moscow-based magazine Afisha, he started cooking as a hobby. He then began taking an interest in historic Russian recipes, only to find that many of the ingredients were unavailable. “In Moscow supermarkets there was no turnip, no geese. When I started scouring markets all over Moscow, I eventually found a goose — but the vendor was unable to tell me where it came from, how old it was or how it had been raised,” he recalls. His reporter’s instinct tickled, Akimov started investigating the supply chain. “I ran into one wholesale trader after another, and often the products were imported or came from some big meat plant.” So, in 2009, he began travelling all over Russia to find farms that would sell him meat, vegetables, berries and butter directly. After sourcing what he needed, he and a friend started sharing their farm contacts with others to lower transport costs. “It began with one farm, then it was five, then 12. Now LavkaLavka has more than 200 farms,” he says. In 2010, Akimov finally quit his job in journalism to focus on running a business that now owns a shop, a farm-produce delivery service, two restaurants and a farmers’ market. LavkaLavka’s restaurant menu features delicacies such as Kamchatka crab with cream cheese and apple jam and barley porridge with duck giblet confit, tarragon, smoked pepper sauce and blackcurrant. The names of the farmers behind every ingredient are listed, and the company arranges farm visits for patrons who want the full experience. Akimov, who appears in company ads with a suckling pig on his arm, says Russian consumers have developed an appetite for farm produce — and not just for health and environmental reasons: “Just like city dwellers in the west, they like the sense of authenticity it gives you.” In 2014, this budding farm-to-table trend received a sudden boost from macro-economics and geopolitics. Europe and the US slapped sanctions on Russia, following its annexation of Crimea from Ukraine. The Russian government responded with a measure often ridiculed as a punishment of its own people: in August that year, it banned the import of a wide range of agricultural goods and food products from countries backing the sanctions. Comprising the US, the EU and a smattering of their allies, these also happened to be Russia’s largest sources of food imports. While the embargo pushed up inflation to double-digit rates for more than a year, there was method behind the madness: the government is trying to use Russia’s political isolation and stand-off with the west to resurrect an industry that has been languishing ever since the collapse of the Soviet economy in 1991 sent it into a tailspin. Despite its vast swaths of arable land, Russia used to import more than 40 per cent of its food prior to the sanctions. In Venyov, the rural district where Tolstoy Heritage is located, only 30 per cent of all agricultural land is currently under cultivation, according to Jens Bruno, the chief executive of Across Invest.  Fields being farmed by Tolstoy Heritage © Davide Monteleone With the imposition of sanctions, that had to change. To achieve this, the government launched an “import substitution” programme — subsidised loans and tax incentives for investment in agriculture and food processing, and even state grants for certain acquisitions of agricultural equipment. Thanks to what agricultural economists have called a perfect storm, the programme might just work. Following the crash of global oil prices, the rouble, which tracks commodity prices closely due to Russia’s high dependency on commodity exports, lost more than half of its value against the dollar between early 2013 and early 2016. In other words, Russian assets became dramatically cheaper, and anything produced in Russia with mostly rouble-denominated input became a lot more competitive. Big investors are having a field day with the cheaper rouble prices of agricultural assets. Since 2014, some of the country’s largest conglomerates have grabbed the opportunity to accumulate agricultural land banks and build or expand their agro-industrial operations. These include Cherkizovo, one of Russia’s largest meat producers; Rusagro, another big agricultural producer; companies owned by the family of Alexander Tkachev, the country’s agriculture minister; and Sistema, the group controlled by oligarch Vladimir Yevtushenkov. Most farms in Russia didn’t invest properly for ages because it was never worth it . . . now there is a window of opportunity PAVEL GRUDININ, DIRECTOR, SOVKHOZ IMENI LENINA “Of course [the embargo] helps us,” says Pavel Grudinin, director of Sovkhoz imeni Lenina, a co-operative formed out of a former state farm on the outskirts of Moscow, which grows fruit for sale in the capital’s markets. “Most farms in Russia didn’t invest properly for ages because it was never worth it — you could always make more money in the oil sector, by speculating in property or just through some corrupt schemes. Now, there is a window of opportunity with some of the international competition locked out.” Andrei Sizov, managing director of SovEcon, an agriculture consultancy in Moscow, says that cheese production and vegetables are benefiting the most from Russia’s food-import embargo. But these opportunities remain out of reach for many of Russia’s small farmers. Sergei Denisov, whose family grows grain on a small farm in Novosibirsk region, says he would like to diversify into milk farming but has no chance of getting a loan for buying livestock and the necessary equipment.  “For the banks we have asked, the threshold remains very high,” Denisov explains. “It takes at least three years for a milk farm to start creating some serious cashflow, and therefore we would need to have several thousands of hectares of land as a security to get a loan. Since we don’t have that, we can only continue what we have been doing — sell our best grain for food purposes and the rest as chicken feed. When the weather is bad and the harvest doesn’t work out, I have to earn extra income as a taxi driver.” A view of the fields that Daniil Tolstoy plans to farm organically © Davide Monteleone Akimov, too, reports that while government subsidies have helped farmers, many small farms fail to get access to the cheap loans that would be essential to boost investment. And most analysts agree. “The effect of the import-substitution policies on the Russian agricultural sector has been muted,” says Sizov. The government’s goal of making the country feed itself remains elusive: according to last year’s trade statistics, it imported US$25bn of agricultural and food products while exporting US$17bn. “I believe the negative balance will continue to decrease in the medium term only gradually,” says Sizov. In Moscow, however, the sudden ban on European food products has sent the capital’s foodies on the hunt for local produce. LavkaLavka launched a farmers’ market in a huge mall on the outskirts of Moscow in late 2015, and opened its second restaurant this spring. Moreover, the embargo and the political attention given to agriculture have attracted new small-scale farmers and artisanal food producers. “Hundreds of people who had long thought about leaving the city, moving back to nature, are now taking the plunge,” says Akimov. No sector has been boosted as strongly as cheese. Eataly, the Italian delicacies retailer, opened its largest franchise outside Rome in Moscow in May without a single wheel of Parmigiano Reggiano. The opening, which had been imminent when the sanctions hit, was delayed for two years to build up alternative supply chains, not least for locally made cheeses. “It is a real boom,” says Alexander Krupetskov, a former computer programmer who opened Cheese Sommelier, Moscow’s first specialised cheese shop, in June 2014.  Krupetskov’s business grew out of a personal love for food that he was unable to find in Moscow. Returning from trips to France and Italy, he despaired when his requests for a cheese with a nutty flavour would produce blank stares from Moscow shopkeepers. “I thought there must be a niche catering to people like me,” he says.  He started his shop with French and Italian cheeses. “When the embargo hit, just a month after I opened, I thought this was the end.” But after a year of barely surviving by selling stock and offering cheese from Switzerland — the only European country with high-quality cheese to escape Moscow’s embargo — new Russian producers started appearing. “A lot of people who used to do other things began making cheese — lawyers, accountants, doctors,” says Krupetskov. “Many of them partner with foreigners,” he adds, unwrapping a fresh goat’s cheese that a French cheesemaker from the Moscow region had dropped off that morning for him to sample. Krupetskov says his customers have adjusted more quickly and completely than he would have liked. “The focus on Russian produce and the lack of European delicacies have become so dominant that people are forgetting the taste of European cheese,” he says, somewhat melancholically. “When we have a new local cheese on offer, they sometimes rave that this is better than French cheese. Of course, that is not true. It probably never will be.” But business is booming. Today, Cheese Sommelier sells up to 500kg of cheese a month, and has franchises in three other Russian cities. It works with 40 Russian suppliers and five Swiss ones. The shift mirrors changes seen across the Russian market. Prior to the sanctions, 52 per cent of the cheese consumed in the country was imported; last year domestic production accounted for more than 70 per cent. A lot of people who used to do other things began making cheese — lawyers, accountants, doctors ALEXANDER KRUPETSKOV, FOUNDER, CHEESE SOMMELIER There is, however, a big gap between the demand reflected in this boom and Moscow’s ambitions for self-reliance in food, partly explained by the uneven implementation of the government’s import-substitution programme. “We would like to offer our products at a bit more affordable prices, but it’s impossible because we can’t get enough quality milk,” says Anastasia Osokina, a cheese vendor at a market in the Central Russian town of Rybinsk, who offers products from BeauReve Maslovka, an artisan maker of French-inspired Camembert-style cheeses from the Lipetsk region.  Any cheese at Osokina’s stall costs at least Rbs2,000 per kilo — on a par with imports from Switzerland, and more expensive than cheeses from new import sources such as Argentina or Tunisia. The same price range applies to LavkaLavka and Cheese Sommelier — high-end outlets where few can afford to shop. Meanwhile, the average supermarket shelf is filled with yellow cubes of industrial, rubber-like cheese that cost as little as Rbs300 a kilo, which barely covers the cost of the milk needed to produce it. The explanation for the divergence between these two extremes can be found in trade statistics. Although Russia’s domestic cheese production grew by at least 20 per cent in both 2015 and 2016, domestic milk production stagnated, while palm-oil imports soared. Officials at Russia’s consumer watchdog confirm that many industrial-cheese producers substitute palm oil for milk in their cheeses. For Tolstoy, such teething problems, together with the cheap rouble and the Russian government’s incentives for agricultural investments, have helped to make a business case for his farm. Last year, Tolstoy Heritage bought a bankrupt agricultural enterprise in Venyov, a town about 60km east of Yasnaya Polyana, for Rbs282m. The price included land, machines, buildings and storage — a bargain in an area that now has some of the highest prices for agricultural land in all of Russia. “This is the closest to Moscow where you can still get black-earth land,” says Bruno, a tall blond Swede who comes to the venture with experience from running Grain Alliance, a massive Stockholm-listed agricultural enterprise that has 51,000 hectares under cultivation in Ukraine, almost 10 times the scale of the new Tolstoy farm. Russia’s agriculture has traditionally been concentrated in a belt running across the south of the country as well as Ukraine — regions that are blessed with dark, fertile soil as fine as dust. The relative proximity of Tolstoy Heritage to Moscow will lower transport costs and allow the company to bypass middlemen and sell its produce to the capital’s comparatively affluent consumers directly. In May, seeding for rapeseed and summer wheat started for the first time. Over the next few months, the company plans to build up a milk and dairy operation that could require additional investment of up to €10m. “It is great timing with the embargo, and we have great opportunities,” Tolstoy says. “Agriculture having been down for so long, people here no longer know how to make anything. That’s our chance.”  He wants to buy Abondance cows, a French breed that gives only half the amount of milk of Holstein cows, the most productive breed, but is of higher quality with more proteins. Tolstoy is also itching to bring in Vincent Lefevre, a French cheese master who runs a chain of cheese shops in Stockholm, to help him build up cheese production. The two have plans for using and expanding a set of caves in a hillside on the farm’s land for ripening the cheese. However, the whole venture has become a lot more complex than Tolstoy ever imagined. When he was first looking into the idea of starting the farm, he enlisted Ilya Tolstoy, a great-nephew from a branch of the family that has long lived close to Yasnaya Polyana, to hunt for suitable land and research what government incentives were applicable. His conclusion: the venture wouldn’t be able to attract financing or become profitable unless they went for a much bigger scale. To manage the farm it now has, Tolstoy Heritage has installed a GPS-based monitoring system that shows the location of every tractor at all times. Leo Tolstoy at Yasnaya Polyana in 1908 © Alamy “It sometimes makes my head spin, how big this has all grown,” Tolstoy says. The field that he watches being ploughed during our visit has an area of 110 hectares — as big as 157 football fields. Bruno is now working to make Tolstoy’s dream fit into Russian reality. “Of course, you could do organic farming in Russia on a smaller scale but if you do it the European way, just 200 hectares or so, it’s too small, nobody will finance it,” he says. The massive scale-up in size means it may be impossible to run organic operations from the outset. The government is pushing to make Russia a supplier of clean food, and the first green shoots of formerly non-existent organic agriculture are starting to emerge. Although the country has yet to create a national certification system for organic food, 82 Russian producers were recognised as organic by a handful of foreign certification groups as of 2015, according to the Research Institute of Organic Agriculture (FIBL), a Swiss-based group that collects data on the sector around the world.  The area of farmland converted to organic agriculture in Russia also doubled in 2014 and increased by another 57 per cent in 2015, making it one of the countries with the fastest-growing organic land reserves in the world, according to FIBL. When Tolstoy Heritage acquired its fields, they had been fallow for at least three years, creating, at one level, ideal conditions for organic farming. “Look at all this life in there,” says Bruno, picking up a lump of moist black earth crawling with worms.  He adds, however, that cultivating these fields without using any pesticides might require tractors to go over them five times as frequently to deal with weeds, wasting a lot of diesel fuel and delaying a first profitable harvest. “We may have to clean everything up once to make some money first that we can use to build up the organic portion,” he says. The new investors are also finding the locals a lot less welcoming than they had hoped. While preparing one of the fields for seeding, they discovered a pit at its centre that turned out to be a rubbish dump used by the nearest village. The company plans to clean it up this autumn, but villagers are now angry that their convenient dumping ground has been closed. Attempts to acquire an abandoned concrete building from the local government as a shed for its farming equipment failed: the mayor sold the shack to a third person who then offered to resell it to the foreigners at more than double the price. Running the farm is also proving more complicated than expected. While test-seeding some winter crops last year, the investors found local staff needed more oversight than they had arranged for. “The local workers were stealing fuel all the time,” says Tolstoy.  Moreover, management has to have constant discussions with tractor drivers over how accurately they should plough. “I get dissatisfied when I see these overgrown stripes next to the road,” says Bruno. But when he mentions that to Denis, the young Russian tractor driver, his answer is short and decisive: “But there is so much land in Russia!”