British farmers reap rich Russian harvest

[Cold Warrior]

From The Times

January 21, 2008

British farmers reap rich Russian harvest
Carl Mortished, World Business Editor

 
In the mad scramble for the spoils left over from the collapse of the Soviet Union, the oligarchs missed something - the soil of Mother Russia. Their mistake left the field open to foreign predators, including a Nottingham-based property developer that is now reaping a rich harvest.

Robert Monk owns Heartland Farms Penza, a 75,000-acre prairie in the fertile Volga region 400 miles southeast of Moscow. It is huge by British standards and, thanks to soaring world grain prices, Mr Monk is profiting. This week he is meeting investors in the hope that they will fund further land grabs, having been approached by fund managers interested in buying farmland.

“We have got the opportunity to buy an extra 150,000 hectares, but we haven't got the money,” Mr Monk says. That would take Heartland Farms Penza to almost 500,000 acres, about the size of Nottinghamshire.

The cost of food has rocketed and hedge funds have filled their boots with wheat, corn and soybean futures. The funds are plotting their next move, trying to spot which asset class is about to come to the boil. Many believe that food inflation will drive up the cost of farmland. The soft, black soil of the Volga basin, where a tractor driver earns just £25 per week, could be their next target.

It takes more than an hour for a combine harvester to cross a field in Penza. The farm is so vast that the vehicles need satellite navigation. Moreover, the soil is high-quality and cheap, according to Richard Willows, the farm's general director and a former crop trader. Fed up with the cost and red tape of farming in Britain, Mr Willows and Colin Hinchley, the operations director, went east, found Penza and invited Mr Monk to invest. “The land and the labour is a tenth of what it costs in Europe but the price of wheat is the same,” Mr Willows says.

Heartland Farms started in 2002, buying up 49-year leases on parcels of land from 1,500 farmers who had inherited shares in former Soviet communal farms. It then agreed the purchase of further plots from the local government to fill in the patchwork quilt of land and bring the total acreage to 75,000. About 30,000 acres are already productive, planted with wheat, barley and oilseed rape.

Mr Monk says that there are vast areas lying fallow, neglected since the collapse of the Soviet regime, and that the Government is anxious to bring it back into use. “There are half a million hectares just going to weeds. It takes you a day to drive across it,” he says.

Russia once exported grain - the Ukraine and Volga regions were touted as a breadbasket for the world - but the Soviet collapse left the food production system and communes in disarray and machinery rusting. The Russian harvest in 2007 is expected to be 81million tonnes, the best for five years, but it will not meet domestic demand. Heartland Farms finds a local market clamouring for its produce. Competitors have moved in: Black Earth Farming, a Swedish-backed company, has raised $115million (£59million) to buy land in Russia and has planted 52,000 hectares.

The market is changing: Heartland is working with PepsiCo, selling potatoes for the American giant's Frit-o-lay crisps, and talks are under way with Heinz to produce beans. Western agribusiness groups have planted roots, but, according to Mr Monk, there is a huge need for more infrastructure, such as grain siloes.

Mr Monk once built student accommodation and shopping centres in the Midlands, but his Russian operation dwarfs all that. Now, Mr Monk says, “the tail is wagging the dog”.

[KenC]

WOW!  That is amazing.  Thanks for sharing.
KenC

[Christian]

WOW!  That is amazing.  Thanks for sharing.
KenC

Yes, indeed, that is amazing and in many respects a fertile blessing.  Depending on how the farm land is cultivate, the fact that the fallow land is "resting" and replenishing itself by its own nutrient levels as well as developing its micro and macro drainage systems, this could prove a wonderfully rich agricultural advantage for the Ukr and FU.

As far as size go it should be noted that there are US farms that are 10,000 acres or more.  In fact about three (3%) percent of Americans farm for a living.  Hence the importance of our farmers.

Christian 

[timothe]

Yes...amazing indeed.  I've always thought of Russia's natural resources as being oil, minerals, natural gas, etc.  I never thought of Russia as being a great place to farm.  But I'm sure the soil there has to be very similar to the soil in the USA's midwest.  The only thing I would be concerned with is that there is a chance that Putin or his successors could decide that all resources must belong to mother Russia.  I know that has historically scared off foreign investment into Russian oil deposits. 

[Christian]

Yes...amazing indeed.  I've always thought of Russia's natural resources as being oil, minerals, natural gas, etc.  I never thought of Russia as being a great place to farm.  But I'm sure the soil there has to be very similar to the soil in the USA's midwest.  The only thing I would be concerned with is that there is a chance that Putin or his successors could decide that all resources must belong to mother Russia.  I know that has historically scared off foreign investment into Russian oil deposits. 

Actually, in some States, the mineral rights are legally divided and sold separately in certain land acquisitions.  Since, however the minerals aren't going anywhere, the top soil is sold separately for cultivation.  Nonetheless, this scenario could prove problematic in the future if one were to exercise and excavate those minerals.

Its not likely, however, that legal rights of ownership could not be protected and remuneration made at the national or even international level.  I don't pretend to be a lawyer versed in such matters.

Even US city municipalities have land right of ways either for widening the streets or for reserved future city thoroughfares traversing neighborhoods or outlying existing farms.

Christian