The Rise and Rise of Large Farms: Why Agroholdings Dominate Russia’s Agricultural Sector

Abstract

Irina Davydova – Research Associate, University of Newcastle. Address: Agriculture Building, Newcastle University, Newcastle upon Tyne, NE1 7RU, Great Britain. E-mail: ira.davydova@gmail.com
Jeremy Franks – Senior Lecturer, School of Agriculture, Food and Rural Development at the University of Newcastle. Address: Agriculture Building, Newcastle University, Newcastle upon Tyne, NE1 7RU, Great Britain. E-mail: j.r.franks@ncl.ac.uk

The main aim of post-Soviet agrarian reforms was to replace Soviet collective farms with much smaller family-based structures characteristic of agricultural production in the West. The rationale for the reforms was based on the belief in the superiority of private over public ownership of businesses, and that the downsizing of Russian farms would make them more efficient. However, twenty years later Russian agricultural production is dominated by large corporate agricultural businesses, which incorporate in their structure dozens of former collective farms. Why have the market reforms resulted in the rise of agroholdings, and are agroholdings here to stay? This paper addresses these questions by putting the development of Russian agroholdings into the wider context of the increase in farm sizes worldwide, and by presenting evidence from two case studies, both located in the Black Earth region, and by focusing on their economies of scale and scope. We conclude that these businesses currently incur significant diseconomies of scale but which are compensated for by economies of scope. We find that the most serious diseconomies of scale are related to labour management and that the technological solutions to these problems favoured by agroholdings risk aggravating the already acute problem of rural unemployment. The future development of business-related institutions and markets will directly affect economies of scope and therefore influence the life-span of very large farms.