There is No Such Thing As Impossible
Is it easy to start a new life at 49, to master a hitherto unfamiliar activity? Not long ago Guy CHEYNEY, who was successfully engaged, since the legendary time of perestroika, in buying non-ferrous metal alloys in Russia, would, for certain, have said: “No, it's not possible!” But in life, so it seems, there is no such thing as impossible. Especially when we are talking about Russia, where, as the hero of our story now knows full well, the plots can develop with the most intricate twists.
He himself is living proof. Having no experience of agriculture, he picked it up as he went along. And since 2004, he has had no little success as Managing Director of the agricultural enterprise Andropovsk AGRO Project LLC, situated in the Andropovsk district of Stravropol Region.
Statistics is an exact science. And the statistics read as follows: last year at the farm, which came about thanks to English investment, 471 tonnes of rape-seed, 11,930 tonnes of wheat, 3,542 tonnes of sunflowers, 610 tonnes of oil flax were grown and went onto the Russian market. But was it an easy road, this road to success?
Don't Count Your Chickens...
As already mentioned, Guy CHEYNEY's business to do with buying non-ferrous metals in Russia was going well. In general, his collaboration was starting already with what was then the USSR, with periodic trade deals in all sorts of goods, going as far back as 1978. Then, his trade connections, for some reason, came to nothing. Then, in 1991, CHEYNEY started doing business again in the Union, as it collapsed before his very eyes, and then in the new Russia. We are talking here about buying metal (mainly aluminium) alloys.
“All the same, the idea of diversifying the business didn't fill me with much ease,” admits Guy CHEYNEY. “My friends in England were producing goods, including poultry. I thought, why not turn my hand to something similar in Russia? In 1998, we were in the middle of discussions about possibly launching such a project in Stavropol. But then there were the rumblings of the impending default, and everything turned to dust before it had even got off the ground...”
Bread, vegetable oil and other products – there will always be a need for them. And risk... There is risk everywhere.
CHEYNEY knows the Russian proverb about not counting your chickens in the autumn. He also knows another one: “The first step is the hardest.” The thought that, despite everything, he had to try to run an agricultural investment project in Russia, made him feel a little uneasy.
“People said to me: an agricultural project in Russia – it's so risky, what are you thinking of?” he remembers. “These people were wrong, and will always be wrong. Bread, vegetable oil and other products – there will always be a need for them. And risk... There is risk everywhere. Yes, it is higher in agriculture than in, for example, industry, but that is no reason to sit with your arms folded.”
Guy CHEYNEY himself doesn't know how to sit idly. But even so, what was it about the area around the village of Krymgereeskoe in particular, which made him decide to carry out his project there?
“It was all quite simple,” says CHEYNEY. “Various parts of Stravropol Region interested me. But then, in 2004, the local government in Andropovsk district exhibited a real interest in us working on their land. That settled it for me. I'm hardly discovering America by saying that, for foreign investors, support from the local authorities is one of the mainstays of successfully launching a business. Especially in the beginning.”
Anna BERDYSHEVA, Analyst for Global Reach Consulting (GRC):
Over the last few years, the Russian cereals market reached its peak in 2008 when it yielded a record harvest. Then, the volume of apparent consumption in physical terms on the cereals market was 94m tonnes. In 2010, due to abnormally hot and dry conditions, the cereals market volume dropped to its lowest point for seven years. Figures for 2011 show that it grew again by more than half, to around 72m tonnes.The proportion of imported produce on the Russian cereals market is negligible. 2011 figures put it at 1%.More than half of the volume of the Russian cereals market is made up of wheat, including meslin. 2011 figures show that these crops made up around 55% of the volume of apparent grain consumption in Russia. Domestic consumption of basic cereal crops like wheat, barley, rye and oats is met by domestic production: the proportion of such crops which were imported over the last seven years did not exceed 4%.Russia has a wealth of farmland including arable land. Furthermore, agricultural development of land increases from north to south. The size of the cultivated area which produced 2011's harvest was 76,500 ha. Most of that cultivated area (about 60%) is given over to cereal crops and leguminous plants. The cost of starting a cereal cultivation business depends on a number of factors. First of all, the choice of area: the cost of land, fertility, and levels of wages all vary significantly. Secondly, it depends on whether the farm will carry out its own minimal grain processing, or sell it on to grain-elevators and transshipment points. Thirdly, investment costs depend on the choice of equipment: whether it is imported or manufactured domestically.On average, the cost of launching a cereal production business over 5,000 ha, not including utilities and equipment, is in order of 180-200m rubles ($5.56m- $6.18m): this includes initial working capital, and payment of interest on loans. Of the production costs for cereal cultivation, 50% goes towards seeds and fertilizer, 20% towards fuel, and 15% towards salaries with deductions. The discounted payback period for such projects with subsidised interest rates is 8-9 years.
Guy knows what he is talking about. He remembers that, in the early days, things did not come easily. Everything required care and attention, and investment. Until the investors arrived, the land they had rented had long since fallen into disrepair, as the agricultural business where Andropovsk AGRO Project was started, had previously gone bankrupt. Buildings, equipment, workers – there were problems everywhere. This is where you will not manage at all without the help of the authorities. Authorities who understand that whoever will, after one to two years, bring work and salaries to people, and profit to the region, deserves to be supported. And it was this very regional government which helped to reduce the time taken for those bureaucratic processes which need to be gone through when officially renting land.
To thaw people's incredulity, to win the approval of the local inhabitants, shareholders, to rent the land, this too was less than straightforward. And this is where help from the regional officials came in once again.
“The head of the district at the time, Viktor Rogachev, was interested in attracting investors, and he held many meetings with the locals in Krymgereevskoe. And we ourselves, of course, didn't stay on the sidelines either,” says Guy CHEYNEY. “We talked to people, chatted with them. The main thing was not to make any promises we couldn't keep.”
The Most Difficult Thing to Change is – Mentality
Guy CHEYNEY recommends that when launching a new business: don't rush it.
“Yes, the support of local officials is important,” he says. “But I had also taken a lot of time to look into the region where I was going to start my business. The main thing about it was that there were more pros than cons.
”The English experts who surveyed the land came to the conclusion: here it was possible to grow wheat, rapeseed, sunflowers, flax... But what about the geographical situation, the transport infrastructure? Here, said the locals, the roads are fine, we can't complain. And its situation is favourable: it is less than 40 km from Krymgereevskoe to the regional centre, and to the Caucasus Federal Highway is all of 20. Nearby there is a railway, an irrigation canal...
Let the Russian government devote more attention to the countryside, make it a priority, and your nation could feed half the world!
3,000 hectares of ploughed land – this is what Guy CHEYNEY's agricultural project started off with. Now, the farm holds more than 14,000 ha. The productive area of the land he rented has grown by almost five times. What about the crop capacity? That, says CHEYNEY, is on average a little higher than for the region as a whole. Using modern equipment and modern soil-cultivation technology produces results. And if you compare the profitability of crops grown at AGRO Project with that of rapeseed, wheat and sunflowers in England?
“It wouldn't be right to compare them,” says CHEYNEY. “All agricultural subsidies in the west are greater by an order of magnitude than in Russia. 150 dollars per hectare – that is something which Russia will not be reaching in any great hurry. But at the same time, let the Russian government devote more attention to the countryside, make it a priority, and your nation could feed half the world!”
Foreigners, warns CHEYNEY, should be prepared for the randomness of prices for farm produce in Russia. The price for anything can change, one way or another, by one and a half times over the year! For example, once the embargo on grain exports from Russia was lifted in 2010, the prices for wheat simply collapsed.
Aleksandr MARTYCHEV, Agriculture Minister for Stavropol
Stavropol Krai is an agrarian region where the agricultural industry is notable for having multiple aspects. The cultivation of grains, sunflowers, rapeseed, maize and other crops, horticulture, vine-growing, cattle-breeding, poultry-farming, pig-breeding, the breeding of fine-fleeced sheep – these are just some of our brands. I can point out that today our agricultural sector employs 218,000 people.We are able to maintain our pace of progressive development each year. Thus, in 2011, more than 100bn rubles worth of agricultural produce was harvested: 15% more than in 2010. These are some of the best figures in Russia. Annually, no fewer than 30 farms make it onto the “Agro-300” list of the 300 most successful agricultural enterprises in Russia. With these figures we can confidently maintain our second place across the whole of the country. Incidentally, we are also second in Russia in terms of gross output of grain production: 8.4m tonnes were harvested here last year. Stavropol's agrarian sector is attractive to investors. 23 large-scale investment projects in crop-cultivation, livestock-breeding, food production, at an overall cost of over 27bn rubles, are already in progress. Poultry complexes, intensive horticulture, agri-parks, dairy-product complexes, sugar and jam production factories, these are just some of the ways in which the agricultural industry of our region has grown, and continues to grow, year on year. As far as state support from the regional and federal budget for the rural population is concerned, over 12bn rubles has been used for this purpose in only the last three years. Help is provided to kolkhoz's, as well as to farms and private small-holdings. Therefore, Andropovsk AGRO Project annually receives subsidies for procuring seeds and fertilizer. Andropovsk region is a risk-farming zone. The climatic and soil conditions here are not as good as in most other regions. But, despite all these problems, Guy CHEYNEY has crop production underway. And although one could not call it large-scale, the important thing is that it shows that funding investors for agriculture, including foreign investors, is a worthwhile exercise.
“A particular characteristic of Russia, is that much depends on the man at the top and those immediately below in the chain of officialdom,” says Guy. “You have to be ready for the fact that when such a person goes, a lot has to be started from scratch. In other words, there has to be a second round of agreements etc.”
As you can see, the problems are not few, yet, despite this, Guy CHEYNEY runs his agribusiness in Russia, and not in England. Why is this?
“Because Russia is a country of huge possibilities,” he says. “Once you have managed to set up your business, it is possible to expand gradually – something we are on the verge of doing ourselves. You have to work hard, but it is like that anywhere...”
Another important point is that in Russia there will always be a demand for agricultural produce, as well as more or less reasonable prices. At the moment, for example, a tonne of rapeseed grown at AGRO Project can be sold for 12-13,000 rubles (about $400). A tonne of grade-3 wheat goes for 6,000 (about $200). The price for a tonne of sunflowers starts at 10,000 rubles (about $300). You can't complain, believes my companion, all things considered. Incidentally, all of Andropovsk AGRO Project's produce is sold on the domestic market.
But Guy CHEYNEY is convinced that the most important thing is – staff. You have to nurture and raise them yourself. For this, there are two complementary methods: encouragement and punishment. If someone resorts to stealing, he is sacked there and then. If someone turns up to work less than sober, the first time there is a fine and a warning. The second time it happens, there are no more warnings...
“When we started the project we had 30 people working for us,” remembers my companion. “Now there are almost a hundred. It wasn't easy filling all the vacancies. Young people do their best to get out of the village – that is a down-side. An up-side is that the professional level of those who stay in the village is very high. And people are keen-witted. It takes only one or two days for a machine-operator to completely master using a modern tractor or combine-harvester.”
Russia is a country of huge possibilities. Once you have managed to set up your business, it is possible to expand gradually.
However, as CHEYNEY says, intelligent people don't just fall from the sky. In actual fact, in the administrative centre, the village of Kursavka, an inter-regional vocational training centre has been running for three years now. There they train machine-operators, cattle-breeders and veterinary surgeons. But why in Kursavka exactly? This is in no small part due to the college on which the centre is founded having a good material basis.
“And if the region didn't have a good vocational training basis?” Guy CHEYNEY asks rhetorically. “Then there really would be a problem with finding workers. My advice to those starting a business in Russia: make sure you find out if there are any educational establishments in the region which might be able to provide you with staff. Staff are everything!”
“What is the average salary?” repeats Guy CHEYNEY. One gets the impression that this frequently asked question arouses slight irritation in him.
“It's all the same what the average temperature is in a hospital,” he replies. “Whoever works hard receives more. The range for qualified machine-operators is, for example, from 12,000 (about $400) to 20,000 (around $650) a month. By comparison, the average farm salary in Stavropol Region is 12,700 rubles (around $400). The overall average salary for the region is 16,700 rubles ($550).”
As CHEYNEY says, the workers' mentality is changing slowly but surely. For example, most understand that agricultural machinery is not just a piece of metal, but a means of production, enabling you to earn a decent income. Once you understand that, the attitude towards equipment becomes more careful, proprietorial.
CHEYNEY says that almost everyone who comes to his farm is interested in whether it helps out in the community.
Imaginary drawbacks have to be turned into actual advantages. What is waste land? It is excellent pasture for livestock!
“Of course – it couldn't be any other way,” he remarks. “And not because that is the done thing in Russia. Our workers are from Krymgereevskoe. It was for them that we bought an ambulance, an ECG machine. We also help out the school, the kindergarten...”
As CHEYNEY admits himself, Andropovsk district is not the best place in Stavropol Region for intensive farming, in terms of its climate.
“A third of our land is so-called inarable land: gullies, slopes, hills,” says the entrepreneur. “But I see it like this: imaginary drawbacks have to be turned into actual advantages. What is waste-land? It is excellent pasture for livestock. Which is why we are getting ready to embark on a cattle-breeding scheme. We will start off with one thousand heads of beef-cattle. We plan to cross a Kalmyk breed with an English one...”
CHEYNEY says that there are still few serviceable grain stores in the area. The answer: to build an up-to-date one on his farm.
And that very same waste-land – is an excellent hunting ground! Which is why he is now in the process of drawing up documents to make provisions for hunting. Hare, partridge, pheasant, roe deer, wolf – and, in CHEYNEY's words, they are not talking about eradicating all of the wildlife in six months and leaving it at that, either.
“We will be re-stocking it,” he says. “We are planning to specialise in pheasant, by the way. If everything goes according to plan, we will start to invite hunters after a year or two – both Russian and from abroad...”
Of course, all these plans are based on the assumption that the size of the farm will be expanded.
“We are planning to increase it from 15,000 hectares to 40,000,” says the Englishman. “I'm looking to the future with guarded optimism. Russia is a big country – changes happen slowly, but they do happen!”
He also advises keeping an eye on legal developments. Only three years ago, for example, the law did not allow for establishing fully-fledged private hunting. And now, not so long ago, the law changed, and it is possible to take part in auctions for the rights to make hunting agreements.
CHEYNEY has serious plans. But his deeds have already shown that in Russia anything is possible: all you have to do is “engage” your brain and your hands. Which means that, for Guy CHEYNEY's second life, this is only just the beginning...