Easier Said Than Done: Land Share Owners Will Seek out for Buyers, Vsevolod Kozhemyako on the Adopted Land Market Model
A law on the land market was adopted. What should the purpose of this law be? I would single out three main ones.
- Stimulating the growth of the agro-industrial sector, i.e. the very investment everyone is talking about.
- Filling the budget.
- Ensuring the constitutional right of land share owners to dispose of it.
Now let us consider which of them are filled.
Hardly can there be any investment and growth in the agricultural sector. With so many restraints, the number of land transactions will be insignificant. Few of the medium and large businesses are interested in investing in 100 hectares. Moreover, foreigners are not authorized. And the less capital there is, the less demand and the lower price are.
Consequently, both business and authorities have no illusions that land reform will fill the budget in this way, for the law does not allow for the sale of state land.
The right to dispose of one's property — this item is only partially fulfilled. Why? If the law were more liberal, globally open to capital, the land price would rise appreciably.
Assume I'm a land share owner. It is buyers I'm primarily interested in. Then I can bargain and get a better price. It's impossible now, there can be no peak prices. So I suppose that people who want to sell their land shares will have to search for a buyer.
According to estimates conducted by our company, about 30% of land share owners are open to selling the land. But, I think, as soon as the first deals are made, people will see the money, the number of those selling will increase.
In the context of land prices and the situation on the land market, do not take the liquidity crisis out of this equation. The cost of farm products is growing with each year, the lease rate is increasing and the margin is falling. Not many will be able to run a sustainable business in these conditions.
The last season was rather tough for many farmers, thus they have no working capital for plantings.
There are many farms up for sale now. The number of proposals for the sale of corporate rights has many times increased in the market. No wonder the price has dropped. It is now in the range of USD 500-700 per hectare.
Crises like these make problems more evident. Some have no margin of safety, while others have not even tried to generate it. Besides, a lot of stray, random people enter the agribusiness every year. They either made money in other industries or accumulated resources in an illegal way. And what to invest in? In agriculture, they say, there is easy money. As a result, the money was invested but it never returned. Such businessmen drop out.
However, I do believe that the land market law is a step forward. We will overcome the mental barrier that land cannot be owned. If we cannot physically introduce a full-fledged market and create conditions right away, at least mentally we will start preparing land share owners for the opportunity to dispose of their property.
The only thing is, I do not understand why state land is not marketed. What happens to the state land then? It is being abused by state officials. On TV they claim that the land is in the hands of the people. In fact, it is in the hands of officials. It is an unaccounted land, it is not in the Cadastre, but physically it exists, it is cultivated. The so-called local princelings get their share from it. And, naturally, the local authorities, the law enforcers are paid too. A whole lot of manipulations, as a result of which the lease payment does not reach the state budget. This is what the law's huge mistake lies in, as I see it.
Vsevolod Kozhemyako, founder and CEO of AGROTRADE Group