Last week, I wrote that I was interested in facilitating some investment in Russian agriculture while I was in Moscow.
One of my sister's friends works as an advisor and consultant in Russian agriculture (sets up deals, etc...). My sister introduced him to my blog couple of months ago and he has been a regular reader since. I got the chance to meet with him last week, and that got me thinking it might be interesting to try to facilitate some investment in Russian agriculture while I was in Moscow.
Russian farm land seems like a very attractive investment. While gold is also a great investment right now, it is a short term investment (something to hold over the next one or two years while the dollar's collapse plays out). In contrast, farm land is an income producing asset, which makes it a great long term investment.
Anyone interested in investing in Russian Agriculture can email me. Once I know what kind of interest there is, I can research more about the investment options available and find the answer to any questions/concerns.
Well, I am still interested in helping set up some investment in Russia agriculture. From those I have talked so far here in Moscow, there are a lot of opportunities in Russian agriculture. There is millions of acres of pristine agricultural land and dozens of companies eager.
Tomorrow I will be meeting with the head of Deloitte & Touche here in Moscow, which should give me a better idea on how to proceed. Deloitte has been one of the most active players putting together deals in Russia's agricultural sector.
Again, anyone interested in investing in Russian Agriculture can email me.
Why agriculture is an attractive investment
I have been bullish on agriculture for several months now. The main reasons I like agriculture in the short and long term are:
1) The world's population (hence demand) continues to grow.
2) Growing global water shortages. See some of some of my other entries for more info:
3) Overstated grain inventories in India and China:
4) The imminent deflation in non-dollar assets, especially commodities.
5) Finally, investments in agriculture will maintain (and increase) their value in a dollar collapse.
Some more info on Russian agriculture
I-Newswire reports about Russian agricultural land assets as unique investment opportunity.
(emphasis mine) [my comment]
06 May 2009
PAVA views land assets as unique investment opportunity
PR-inside 6 May 2009
PAVA together with its agricultural subsidiary explores the investment potential of Russian lands amid the world booming demand on agricultural resources
Agricultural investment has gained an increasing scope recently, and in view of the latest developments on the world economic scene, it is unlikely to subside for decades. Food importing countries with land and water constraints — including Saudi Arabia, the Emirates, South Korea, China, India, Libya and Egypt among others — are at the forefront of new investments into agricultural land. The growing number of overseas deals with land has led to higher competition; farmland prices have risen throughout the world in recent years.
The largest Russian grain processor PAVA together with its agricultural subsidiary, an owner and developer of agricultural land in Russia, called 'Russian Agricultural Division' (RAD) is keeping the situation in perspective, and consolidates vast tracts of the country's agricultural land. RAD was established in 2008 to acquire agricultural land assets in Russia with the intention of becoming a large-scale producer of high-value added agricultural feedstock including wheat, barley, rye, sunflower seeds, buckwheat and peas for foreign and domestic market supplies.
"Abundant farmlands in Russia provide a unique investment opportunity; besides, land in Russia is still an underestimated asset [Agreed]. For instance, in the USA the average price per 1 ha stands at $10,000 - $30,000, while in Russia the figures are much lower, sometimes reaching the level of $250 per ha. Clearly, the potential is very strong", says Galina Balaenkova, PAVA Head of IR and International Business Development Department. "With double impact of the financial and food crises, agricultural land has now become a strategic asset for our company", Ms Balaenkova continues. "This is prompted by unstable crop prices and aggravated by the biofuels boom — while the UN sees the increasing number of starving and malnourished population. Large agribusinesses have the key role in contributing to world food safety, possessing the right tools for making the investment work efficiently".
Russian Agricultural Division aims to acquire and cultivate agricultural land by introducing modern equipment and management; moreover the Company intends to increase the productivity of the land, generate cash flows and create value by land value appreciation.
RAD presently controls over 160,000 ha of land in different regions of Russia, and envisages to increase this amount to at least 500,000 ha by end-2010. As of today, RAD is controlled by PAVA who is willing to cede up to 40% of its control through a share issue in a Private Placement transaction. Investors, both Russian and foreign, are interested to invest millions of dollars into Russian land to help bring around the long-neglected farmland amid of food crisis.
"Our aim is to create mutual benefits. PAVA is also implementing an advanced wheat grain processing project, which would enable us not only to increase world supplies of prime-quality agricultural produce and high value-added ingredients, but also to promote the development of national economy ", adds Ms Balaenkova.
Contrarian Profits reports on Russian Agriculture.
Cash In on Russian Agriculture Boom with Black Earth Farming
Sep 2nd, 2008 By Irwin Greenstein
Soaring food prices are turning Russia's former Soviet farming collectives into modern capitalist havens, says Irwin Greenstein, writing for Contrarian Profits.
One company called Black Earth Farming (STO:BEFSDB) is leading the charge into millions of acres of prime Russian farmland left fallow after the collapse of the Soviet Union.
Black Earth Farming is part of a movement by hedge funds, portfolio managers and Russian insiders to capitalize on the worldwide boom in food. This is a great long-term opportunity for foreign-equity investors.
Approximately 7% of all arable land on the planet is owned either by the Russian state or by collective farms. Of that, roughly 35 million pristine hectares lies uncultivated. (A hectare is about two and a half acres.) To put that into perspective, Britain has 6 million hectares of cultivatable land.
The land under till coughs up tiny yields due to poor work ethics and antiquated technology. The average Russian grain yield is 1.85 tons a hectare - compared with 6.36 tons a hectare in the U.S.
The enormous agricultural potential of Russia's farmland has caused prices to double in the last two years. The average price a hectare was $570 in 2006 and is now $1,000. [However there is still a lot of land going for 500]
USDA gives an overview of Russian agricultural.
Crop Production Regions
Russia's main agricultural region extends from the Central district in European Russia, bordering Ukraine and Belarus, to western Siberia 3,000 miles to the east. Of the country's nearly 200 million hectares of agricultural land, roughly 120 million is planted to row crops (chiefly grains, annual or perennial forages, sunflowers, potatoes, and vegetables) or temporarily fallow. The remainder is devoted to permanent meadow or pasture. (View regional breakdown of sown area of major crops in Russia.)
The School of Russian and Asian Studies gives us some graphics about Russian agriculture.
Intensivity of Russian agriculture as of 2006. Red and pink areas are intensively used (though not necessarily producing maximum yields). Orange areas have large-scale farming, but little investment in machinery and fertilizers. Blue is occupied by reindeer production. Green is classed as "unused." Note that this map does not take into consideration areas under heavy forestation that may be more effectively used for timber rather than agriculture. Graph source: IIASA
Dispersal of commercially viable timber breeds in Russia. Source: Borealforest.org Note that not all areas are heavily forested. Timber with the most profit potential lies in the forests within the farthest western third of Russia and the easternmost eighth of the country.
My reaction: Land in Russia is still an underestimated asset.
1) In the US the average price per 1 ha stands at $10,000 - $30,000, while Russian land is selling around $500.
2) Roughly 35 million pristine hectares lies uncultivated. (Britain has 6 million hectares of cultivatable land.)
3) The average Russian grain yield is 1.85 tons a hectare (compared with 6.36 tons a hectare in the US)
Conclusion: Russian agriculture presents a very attractive investment opportunity.