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"Ambitions and clarity are needed in the Far East"
Maxim Basov on Rusagro's strategy to conquer the Asia-Pacific market
Photo: Tass / VEF Photobank
"Rusagro" is engaged in several Far Eastern projects, one of which - corn-soybean - has already reached the scale of the largest in Primorye, while others in conjunction with it will soon fill the local market with pork and processed products. How to succeed in the initially risky sphere in a difficult region for the business, what will happen when China wants to buy Russian meat and soybean meal, and if the GMO culture is needed in the Far East, EastRussia was interested in the director general of Rusagro GC Maxim Basov.
- Few companies of federal scale go to the Far East. What for "Rusagro" this macroregion, what is it looking for and has already received the Civil Code?
- "Rusagro" went to the Far East recently - in 2015 year. The past year has been successful for all three of our businesses in the region: agricultural, food and livestock. The first has grown on the areas - now in the Far East it is already 80 thousand hectares. As a result, Rusagro, on the one hand, became the largest company in the field of plant growing in Primorsky Krai, and on the other hand, we fulfilled the minimum task within the framework of providing our own pig-breeding complexes with our own products. The yield of soybeans and corn has increased in comparison with 2015. The production results in this area may not yet correspond to those that we would like to see. But it only means that we have a lot of work to do. It is necessary to strengthen, learn and increase the yield.
- Grain products go to the domestic market or for export?
- In 2016, Rusagro collected corn and soybeans in approximately equal proportions. Almost all corn is exported to Japan. The consumption of this culture in Primorye is virtually absent - the Mikhailovsky Broiler is the only significant consumer. In the future, the situation, I think, will change - with the release of the planned indicators of our own livestock sector. China is still selling off state reserves and is not very interested in importing Russian corn, however, its interest will grow in the future. Today Japan is the best buyer for us. But soon everyone, I am sure, will simply fight for Rusagro corn. In anticipation of this, we are introducing at the port of Vladivostok, together with FESCO, new container handling technologies, which allow us to supply bulk cargo with minimal costs. We are shipping soybeans to our own Primorskaya soya plant, and this year we will focus on it. In 2017, we will sow around 70 in total a thousand hectares of arable land and expect that it will be two thirds in the crop rotation.
- Are APR countries demonstrating demand only for grain?
- Demand for agricultural products "Rusagro" on their part is stable, but, unfortunately, not for processed products. For example, the company can not supply the food to China at all - today, it does not buy anything from outside, developing its own processing of beans. We, of course, plan to supply to China besides grain products of processing. But so far only oil.
- What else can Rusagro offer to the market from self-processed food products?
- Unfortunately, the soybean plant was not fully supplied with raw materials last year and was idle for three months. Nevertheless, a record crop of beans was harvested in 2016, and this year the harvest also started well. At the outlet of the plant there is butter sold in Russia, China and Korea, mayonnaise and meal supplied to the domestic market. Rusagro is studying the prospects for expanding the plant's capacity. True, there are some limitations here: the narrowness of the meal sales market and the low competitiveness of the products of the Primorsky plant in the European part of Russia due to the transport component.
- Plans to enter the market with livestock products in force?
- Yes, although the pig direction has a slightly different configuration. Gazprom's gas pipeline and infrastructure to the larger slaughter of the complex was delayed, but at the end of last year the company managed to buy the property of the slaughterhouse in Ussuriysk, which, after equipping with necessary equipment, will begin its work in 2018. Thus, with our cattle-breeding products, we will enter the market not in 2019-m, but a year earlier. And by the end of next year "Rusagro" will produce in the region 2,2-3 thousand tons of pork per month. In the near future, we will have five pig farms in the Far East.
- This will greatly change the local market?
- After the launch of the first five pig complexes of the company in the Far East, by the end of 2018 the quantity of pork of non-native origin will be minimal here. Completely imported pork, of course, will not disappear. But any region, even large, some parts of pork exports, some parts - imports. In Russia, for example, unlike in other countries, there is more consumption of the cervix - it will always be missed. A brisket, which we eat a little, there will always be an overabundance. How fast the local products will be squeezed out of the Near East, will depend on the introduction of pig farms. But I am sure that in the long term, the Far East will fully provide itself and begin to supply pork, for example, in Transbaikalia. And sooner or later - to China, Japan and Korea.
- On the topic of expanding exports: how do you feel about the idea of the head of the Russian Grain Union that it is necessary to increase supplies from the Far East to the APR countries at the expense of GMO crops?
I do not agree. The resolution of GMO seeds will reduce the cost of production, but also the prices too. Russia gets a big profit from sales of its agricultural products to the APR countries precisely because it does not contain GMOs. Yes, and in the Far East, the demand for products with GMOs will be much lower. Therefore, I do not believe that Russia will allow this at all.
- In December, you said that Rusagro will review its investment program in favor of completing the projects already started, will develop exports and conduct mergers and acquisitions. How will this affect the Far East?
- The investment program has already been revised. As a result, it even increased - we expect a record 30 billion rubles in investments. Yes, the company refused some projects, but some added it. The reasons for the reduction of investments are a serious drop in margins and a reduction in state support. But this tendency does not spread to the Far East. So we have no plans to reduce the investment program in the region. The company's investments in Primorye will go to purchase land, infrastructure, strengthen production bases and, possibly, build a new one. Also in the plans is the acquisition of new equipment. But the main emphasis is on the development of the livestock sector.
"Will the state help you here?" How significant is the concluded agreement with the "Fund for the Development of the Far East and the Baikal Region"?
- The agreement with the fund is borrowed funds at 5% per annum, and funding is provided, which is most important, now. However, for us, cooperation with the state structure is also valuable because it facilitates negotiations with partners from the APR. This is especially significant for China, where state-owned companies are well aware of the FRDV, regard its support as a kind of approval from the government and go to contact more quickly.
- What are the prospects with Japan? In December, you signed an agreement with Mitsui, what is planned for it?
- This agreement provides for three areas. The first is Mitsui's assistance in selling Rusagro products in Japan and other East Asian countries. The second is the study and transfer of Japanese production and marketing technologies to Russia. The third is Mitsui's investment in Rusagro. In general, within the framework of the agreement, about thirty possible directions for cooperation are outlined, which Rusagro and Mitsui are studying. It, for example, automation of manufacture, packing, manufacturing essentially new for Russia production. But the main three I called first.
- Does Rusagro have any plans to go beyond Primorye?
- For now, you need to cope with what is already there. Of course, with the prospect of China opening a market for pork in other regions of the Far East, pig-breeding complexes will inevitably begin to appear. And we will not stand aside. But Primorsky Krai was initially chosen by Rusagro because of its logistical advantages, favorable to work with Japan, China and Korea. There were, of course, even more reasons - the region is dynamically developing both in terms of increasing the tourist flow, and in terms of population. And this means that the food market in it is only growing.
- In conclusion, please share the secret of business success in the Far East. If he, of course, is.
- The point is ambitions. To manage the Far East project from Moscow, ambitions are needed. Even for regular flights to the Far East, although there are many other difficulties. A project in this region is generally very difficult. In my estimation, the Far East is not yet accustomed to developing large-scale projects at a rapid pace — such is the environment. People do not look to the future, but simply want to put money in their pockets - that's all. But apart from ambitions, in order to succeed in the Far East, you need to have a clear vision of the future project and the willingness to spend your time to achieve a result. The state is ready to help those who are willing to invest here. So I believe in the Far East - as well as in several other regions of the world that presuppose farming. The Far East has its natural advantage - land and moisture. But its potential is much broader, and agriculture, in my opinion, is only one of the potentially successful areas.