"Chicken and Egg" Problem in the Meat Sector of Buryatia

During centuries animal husbandry was the most traditional agricultural activity of Buryats. Under the command economy the region was specialised in the meet sector, with the largest meet processing factory in Russia. Due to large imports from Mongolia the factory benefited from economies of scale. During the transition period Mongolia found new export markets for its products, hurting Buryatian imports. Moreover, the transition period hardships in Buryatia caused a substantial decrease in livestock production with an immediate decrease in meet production. To overcome the hardships of meet sector in particular and those of regional agriculture in Russia in general, it is essential to reveal the regional comparative advantages taking into consideration local agro-climatic conditions and resource endowments. Buryatia has a risky agriculture, with grain yields of 1,1 t/ha, the yield of milk of 2400 kg per year, and daily average weight growth of cattle by 300 grams. Nevertheless compared with other regions, where animal husbandry experiences a steady negative growth, the last years witnessed a growth of cattle (4%-8%) in Buryatia. Also the large share (43 % compared with 27 % in Russia) of rural population; 35% unused agricultural land; rising rate of foreign investments (in 2007, 140% that of 2005). The above mentioned and some other arguments encourage the hypothesis, that Buryatiya has a comparative advantage for animal husbandry of agriculture and of meet processing sector. The methodology of spatial equilibrium analysis using the GAMS programming techniques was applied to test the hypothesis. The results of the empirical model and the sensitivity analysis prove that among all the analysed meet products the development of sheep breeding industry has the highest comparative advantage in Buryatia. The model provides the optimal production and consumption quantities and prices, as well as recommends the optimal trade flows of the four selected products to other regions presented in the model. The favourable position of mutton production can be explained with the cultivation of native breeds of sheep and with the availability of pastures. Yet the chicken and egg problem remains: should the development of meat processing enterprises in Buryatia stimulate the development of animal husbandry or vice versa? Here is an adequate state intervention necessary.