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The general director of the group of companies "Rusagro" Maxim Basov - in an interview with EastRussia

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Maxim Basov

The general director of the Rusagro group of companies Maxim Basov told EastRussia about the creation of a new agricultural cluster in Primorye, about the prospects for importing pork to the Asia-Pacific countries and how semi-finished meat products will take part of the market from sausages.

- Maksim Dmitrievich, the project of the Rusagro company was included in the list of investment projects of the Ministry of Development of the Far East selected by the interdepartmental commission. You were going to start construction of the Primorsky Bacon pig-breeding complex this year, you already have loan agreements and the possibility of preferential loans from the Central Bank. Have your plans changed?

- The Rusagro group of companies has several lines of business: sugar, agriculture, meat, oils and fats. In all these areas, we are among the leading indicators in Russia. 2014 was a phenomenal year for us - financial results were many times better than in 2013. I believe that in the near future we will make an even greater leap forward precisely because we plan to conquer positions in the Far East.

In the FEFD, we are present in the Primorsky Territory in two business areas. The first is crop production: we grow soybean and maize on 26,5 hectares of land (at the same time we expect to expand the land bank to the extent possible). Secondly, we are the minority owner of the Ussuriysk oil and fat plant. We own an 25% controlling interest.

Now we are developing a new direction. And taking into account the fact that Vladivostok is very far from the central regions of the country, we do not use grocery, but test the regional construction of business - we are engaged in the design of pig breeding complexes and a feed mill. For the first phase of the implementation of this project, we received the approval of two commissions - the Ministry of Agriculture, which provides subsidies at a rate of 8,25 percent per annum, and a project finance commission, under which we will receive a loan at approximately 11,5 percent per annum. These two types of subsidies will make the project payback. To start construction, we need to complete the design and agree with the regional authorities and the Ministry of the Far East on how the infrastructure will be created. If everything goes according to plan, we will start construction in late August - early September this year.

- Please tell us more about the project.

- The project of the pig-breeding complex involves three stages: first we need 40 thousand hectares of land (in part we already have it), where we will grow 30 thousand sows, and in 10 monoblock complexes we will receive approximately 100 thousand tons of pork in Year in live weight.

In addition, the complex will include a feed mill, a pork processing plant and a waste disposal plant. We will start building this year - we will finish in 2017. This means that pork will enter the market in 2018. We need about 17 billion rubles of investments: 80% will be financed by a loan, the creditor - Alfa-Bank, and the rest - from our own funds.

We will start the second phase of the project - and this is still the same volume - one year after the completion of the first phase. For now, we are planning to produce pork products that will go entirely only to the domestic market, and at the second stage of the project, we will export part of the products. There are many pork export markets, and Primorye is a great place where, in addition to the Russian market, there are markets of China, Korea, Japan, and these are the largest pork importers in the world today.

The third phase of the project will be the same as the second. We will do it if we can buy land in the region.

- The project of the complex will be implemented privately or on the principles of public-Private partnership?

- It will be a private project - it just gets government support. First, it is subsidizing loans, which I have already mentioned. Secondly, the Ministry of the Far East promises to ensure the development of infrastructure through inclusion in the federal target program or through the priority development area (PDA) "Mikhailovsky". Thirdly, the usual support, which is provided within the framework of the general program of the Ministry of Agriculture, which will help us create a breeding and genetic center or receive subsidies for the purchase of raw materials.

- Rusagro fell into the trend of "turning to the East" set by President Putin. How did you find this direction?

- The fact that it is possible to create a huge production of food products in Primorsky Krai with low cost, high quality and neighboring large import markets has long been evident. But nobody did it, because the state did not subsidize the infrastructure (without it there is nothing to do), and companies that can afford to successfully implement such large projects appeared in Russia only in the last five years - before that they simply did not exist.

However, until now, almost all players are occupied with the Central European part, but now, as capacities are created, companies are looking for new niches for themselves. Some went to a different type of meat (for example, Miratorg), and last year our company decided to go to a different geography - to the Far East.

- Other Far Eastern regions, except for Primorye, did you watch?

"We watched the Khabarovsk Territory, the Amur Region, and the Jewish Autonomous Region, but the circumstances developed that in Primorsky Krai it was possible to buy land. Perhaps, as we progress in the Primorsky Territory, we will go to other regions of the Far East.

- In Primorye, you are going to deal not only with pigs, but also create an entire agricultural cluster?

- Yes. We are interested in the chicken direction, we are working on the direction of aquaculture. We would like to do these projects in Primorye too.

So far we have a limited management resource, and our strategy in this situation is to do everything in clusters. Thus, the Belgorod region is our first cluster, the Tambov-Voronezh region is the second. There is also Yekaterinburg and Samara, but these are not clusters. But the third cluster will be in Primorye. Moreover, in a few years, according to my preliminary calculations, the Primorsky cluster will be the largest in our company. Moreover, it will become a springboard from which we will begin our expansion into the markets of China, Japan and Korea.

- Which of these markets is the most promising?

- China. China imports a lot of pork. The price in China for pork is much higher than in Russia. Today in China it is 140 rubles per kilogram, in Central Russia (well, in the Far East, too, the high price) is conditional 100-110 rubles per kilogram of live weight.

- However, block frozen meat that is shipped to Russia from Latin America is even cheaper.

- In this regard, in the near future we are considering the possibility of starting import of foreign pork to the Far East (until we have started our production there), because we see a great need of Primorye meat. Import and carry meat from the European part of the country to the east is unprofitable, but it makes sense to transport frozen pork from Latin America. The price of imported frozen meat will be slightly lower, although we expect prices to fall in this segment of the market as a whole. In our seaside project, the price reduction is also included, but block frozen meat will always be cheaper than the chilled meat that we will produce.

- Are you not afraid that in the crisis the popularity of chilled meat will be lower than that of frozen meat?

- Frozen and fresh meat are different products for which there are different markets. But we predict that our meat cost will be comparable to its cost in Brazil, only our quality will be higher - chilled meat will be supplied to the market. In addition, we will produce the highest quality consumer semi-finished products. We focus on Japanese quality, which is considered the best in the world. That is, in the Far East we will be able to meet the needs of different levels of consumers. Yes, someone will buy a cheaper product - frozen pork; for those who want better quality meat, there will be a more expensive one. Someone will subsequently switch to our chicken or aquaculture. We will cover everyone with our products.

- How does the crisis affect the livestock industry?

- We do not have a crisis, we have, on the contrary, growth. In general, the production of chicken and pork is growing in Russia. We have record financial indicators. The crisis is associated only with expensive loan rates, this is true. We suffer too. But it does not stop us.

- Pork production quickly pays for itself - that is why many producers rely on it. But what about consumer health care?

- The fact that pork is considered a harmful product is an illusion. Neither pork, nor beef, nor chicken are considered junk food - the question is rather in quantity. Pork is made up mostly of protein and fat, with a little more carbohydrates. These are the three components of any food. The animal fat in pork is much healthier than in beef. Pork contains a lot of vitamins. Another thing is that pork is more fatty meat than beef. If you do not eat the fattest part of it, then, on the contrary, it is necessary, I believe, for proper nutrition. Take a look at the latest food trends in the US - pork is advertised under the slogan "other white meat".

- What technologies of growing your mass production in animal husbandry and plant growing (beets, soybeans, corn) are you going to apply in Primorye? Will you stick to the organic direction?

- The organic movement is developed mainly in Europe, partly in America. This is when intensive agricultural technologies are not used. Of course, we will partially apply manure when our pig-breeding complex is launched. But we cannot do without the use of intensive forms of agriculture - we are designed for the mass consumer.

However, Primorye is an ecological region where there is no pollution and poisonous soils, like in China. We already supply vegetable oil to China, where it is sold in stores with a green leaf - the Chinese stick it on themselves: they believe that everything that comes from the Primorsky Territory is environmentally friendly.

Moreover, there is no such thing as "right" or "wrong" technology. In the European part of Russia, one needs the same growing conditions. Primorye has a completely different climate, a completely different land - therefore, different technologies will be used there. For example, when it comes to seeds, we think the most suitable seeds are Chinese. Unfortunately, Chinese seeds are not allowed for use in Primorye (they are used illegally in the region - they are not certified), and Russian seeds are not suitable, since they were bred for the European part of the country. There are very few Far Eastern seeds. This year we will use Canadian seeds, because this is the only successful selection that is certified in the Primorsky Territory. Further we plan to develop our own seed farm. We have begun consultations with the Chinese Academy of Sciences to license and localize Chinese seeds in the Russian Federation in the near future.

- Market sausage is not going to conquer? Due to the skillful combination of chicken and soybeans, it is possible to create supercheap production and feed the whole country?

- No, we want to feed people with pork. I think in the near future sausages will lose market share, because more pork products will appear, and the price of meat will fall. We see that the market of consumer semi-finished pork products is growing very rapidly in Russia, and will grow further.

We do not make sausage in principle, there are many other players in this market. We will take away the market of pig semi-finished products: we launch our carnage in the Tambov region in May, and by the end of the summer in the Russian retail chains in the European part of the country, in the Urals and in the Volga region it will be possible to buy our semi-finished products.

- Oil and fats are one of the leading areas of your business. In addition, you are the minority owner of the Ussuriysk oil and fat plant. A small segment of your business is spreads. Why would you produce this unpopular product, glorified in Russia only in the early 2000s by advertising the Rama spread?

- Yes, practically few people produce spreads in Russia. We are the third in the country in terms of spreads. But we want to be the first, because spread is a very useful product. It is much healthier than butter. In many countries of the world, except Russia, butter and margarine, produced according to the old technology, have not been eaten for a long time. Spreads are consumed even in New Zealand.

Rama spread is a much healthier product than butter and margarine. In Russian margarines, which are produced according to the existing technology (although the technology is changing and old margarines will not be available soon, as new requirements for the usefulness of the product are introduced), there is a really high content of trans isomers. This is due to the fact that the vegetable oil is hydrogenated to become solid. And in this case, questions really arise about the benefits of the product.

In butter, a high proportion of cholesterol is animal fat. And the spread is exactly the product that tastes like butter, and even better, but is made from vegetable fat not by hydrogenation, but by transesterification, in which trans isomers are not formed. Spreads are so popular in the world that now they belong to a new category of functional nutrition: they add the right ingredients - Omega-3 acids, which are deoxidants, various other types of oils, vitamins. Spreads are the product of the future. In the next five years they will conquer Russia.

- Have you ever thought about entering the elite segment of organic production?

"No, it's not ours." We work on large volumes. Organic niches will certainly be occupied, this is the business of small entrepreneurs, small companies. We are engaged in hundreds of thousands of tons of products. This is ours, this is our strength.

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