Crop production in Russia is profitable business

Crop production has become a very profitable business in Russia since 2014. What is the reason for such activity and profitability in the Russian agro-industrial complex?

Profitable crop production in RussiaThere are several main factors:

  1. it is that quite large farms with land banks of 100,000 to 100,000 have appeared.
  2. 5 million acres.
  3. The sanctions resulted in Russia ceasing to buy many goods from other countries, especially European and American, which led to annual growth of 6-15% in various industries and 10-30% in agriculture.
  4. Russia has entered the world markets to export grain, sunflower oil, coriander, soybeans and other agricultural products.
  5. The arrival of foreign investors and, with them, new technologies.
  6. In Russia, the use of GMO products is prohibited; for example, in China or Turkey, products from Russia are already a brand of environmentally friendly products.
  7. Another important factor in the growth of Russian agriculture is the increase in the number of people on earth, especially in China and India. Russian sunflower oil goes to China and India, wheat goes to the Persian Gulf countries, coriander goes to India, and soybeans go to China and Vietnam.

Who are these owners of companies that rank in the top five agricultural producers in Russia and what they grow and produce?

According to the results of 2018, the largest agricultural enterprise in Russia was Sodruzhestvo group of companies. Natalia Lutsenko. During the year, the holding managed to increase revenue by 36% (one of the best results in the industry).

The group was founded in 1994, its business began with the trade of feed and feed additives. Then the company built two oil extraction plants in the Kaliningrad special economic zone and became Russia’s largest producer of vegetable oils. Today “community” is engaged in processing of soybeans and rapeseed, the purchase of grain and oilseeds. The company’s production assets are located in Russia, Belarus, Brazil, Paraguay and Turkey. According to the company itself, in the 2017/18 financial year (the holding’s parent company is registered in Luxembourg, so its reports are formed from July 1 to June 30), its revenue amounted to $ 2.6 billion, or 170 billion rubles.

Miratorg is in second place» Viktor and Alexander Linnikov. According to SPARK, which we rely on, its revenues in 2018 decreased by almost 5%, to 119.4 billion rubles. The result is most likely due to a reduction in sales of imported meat from Brazil (-33%) last year against the background of a temporary ban on its import. Sales of the company’s own products in monetary terms increased by 12.6%. According to Infoline analysts ‘ forecasts, Miratorg’s revenue may grow by another 7% by the end of 2019. However, the holding is likely to make a powerful leap: now it is in an active investment phase, implementing a large-scale project to double the pig production capacity to one million tons of meat in live weight per year (according to our data, in 2018, the total investment of the company amounted to 8.5 billion rubles). By 2022, in addition to new pig farms and grain companies, Miratorg plans to create two feed mills and build Europe’s largest robotic meat-and-meat slaughterhouse with a capacity of 4.5 million pigs, or 525 thousand tons of slaughter weight per year, in the Kursk region.

We also note that Miratorg, according to our calculations, turned out to be one of the most profitable holdings. Its net profit margin is close to 18%.

EFKO group, the largest enterprise in the fat and oil industry in Russia, entered the top three, as it did a year earlier. In 2018, the group increased its revenue by 5% compared to 2017, to 114 billion rubles. The company’s oilseed processing capacity, located in the Belgorod region, Krasnodar territory and Kazakhstan, exceeds two million tons per year. In may 2019, EFKO opened new margarine production lines at the Food ingredients plant in Taman. The company’s marine terminal for handling liquid food cargo is also located there.

Cherkizovo group closes the top five. Sergey and Eugene Mikhailov. In 2018, the holding increased revenue by 13.5%, to 102.6 billion rubles. The main” driving force ” of the company was pig farming, which showed double-digit growth rates (26.2% in money). This high dynamics is explained by an increase in sales by 16.7%, which was facilitated by the launch of new sites in the Voronezh and Lipetsk regions. In the first half of 2019, the group continued to increase its pace: its revenues jumped by 25% compared to the same period in 2018, to 55.7 billion rubles.

Top of the most dynamic companies in 2018 was headed by Step holding (agribusiness AFK Sistema). Its revenue increased 2.3 times. As a result, the company that was not previously present in the rating soared immediately to 27th place. “The positive dynamics was provided by growth in the “crop production” segment, intensive development of agricultural trading, as well as an increase in production in the “dairy farming” segment and the start of work in sugar and grocery trading,” the company said in an official statement.

Last year, the Steppes management announced plans to enter the top five Russian grain exporters and build a terminal in Azov for its transshipment. In addition, the company intended to start construction in the Salsky district of the largest dairy farm in the Rostov region for three thousand heads of dairy cattle.

The most effective land user in the Russian agro-industrial complex in 2018 was the Siberian agricultural group, which owned almost 20 thousand hectares of land and received 1.2 million rubles in revenue per hectare. Agro-Belogorye is the champion in labor productivity: the holding’s revenue per employee exceeded 14 million rubles last year.

Robot in the field

And another important sign of the times is digitalization. Almost all participants in the rating (and other agricultural enterprises along with them) speak of it as the most powerful trend. “The most popular service in agriculture today is monitoring,” says Alexey Petunin, Deputy General Director of SAP CIS. — We are talking about equipping cars with cheap GPS sensors and collecting information about the movement of equipment, inventory, and work performed. The popularity of the solution is understandable: it is a simple and cheap technology that allows you to control the use of fuel, track how tractors and combines are used, monitor the costs and validity of writing off seeds, chemicals, and so on.”

However, the survey showed that in addition to monitoring, agricultural enterprises are implementing a number of other solutions. For example, Eco-culture holding has built a computerized climate control system. “The processor manages the full cycle of growing crops, regulates the heating system and cooling, light mode, drip irrigation, and the content of carbon dioxide in the atmosphere,” comments Alexander Rudakov, Chairman of the Board of Directors of the holding. – The equipment creates ideal conditions for the growth and development of plants. Additionally, the accounting of employees ‘ working hours is monitored.”

Umalat’s new mozzarella shop has a system that tracks indicators at all stages of cheese production. According to Alexey Martynenko, it replaces four laboratory assistants who would have to continuously conduct tests on the quality of raw materials and the final product: “We analyze the quality of cheese directly in the stream. If something is wrong with the indicators, the operator can make online changes to the process — for example, increase the percentage of moisture or fat-without stopping production.”

“For us, first of all, digitalization in production accounting is relevant, “the General Director of Promagro agribusiness develops the topic” Konstantin Klyuk. — This is the use of chip tags for animals, scanners for reading information from tags with the ability to transmit information directly to the accounting program. Also relevant are all kinds of flow meters (water, feed, energy), the readings of which allow you to quickly respond to changes in the condition of animals. In crop production, we use the Precision agriculture agricultural management system, which allows us to obtain centralized data on a number of indicators and conduct their operational analysis.”

We include companies that have agricultural assets in Russia (arable land, production facilities, cattle, elevators, fish farms), produce feed, and companies that have a significant influence on the development of agro-industrial complexes in the regions (for this reason the list annually includes, for example, Danone Russia and Wimm-Bill-Dann). We intentionally excluded other net processors, agricultural or fisheries trading organisations from the calculation. Therefore, the list did not include, say, Nestle, Fazer, Progress, Russian Fishing Company and Russian Fishing Company, Reef Trading House. The final result of multi-profile holdings did not include revenue from non-agricultural activities.

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