30.01.2009

Year 2008 in review by Victor Semenov

Today’s situation concerning the world financial crisis has resulted in agricultural businesses necessity to slow down current projects and suspend new ones. This is sad because although many businesses have managed to gather pace it’s rather difficult to get new loans for further development.

There is one more issue. Agrarians got heavy crop this year which caused troubles instead of bringing benefit. Unfortunately, prices slash due to poor demand. Purchasing intervention does not work. On the one hand the market temporizes; on the other hand the government (to my mind) has not yet made the purchasing intervention scheme available for producers, especially for small and medium-sized manufacturers. That is why traders are often the only participants of the above mentioned intervention, which is wrong as our goal is to support agricultural producer, not buyer-up.

One more issue is that many businesses not having managed to make cattle breeding profitable still survive by crop growing, which profitableness has turned negative recently. This affords ground for mass agro-industrial failures in the nearest future.

It will be observed that there are troubles on a milk market also. This year the immense amount of dry milk was imported to Russia and now many plants launch it on the market, thus reducing demand for liquid milk. As a result purchase prices fell down resulting in manufacturers’ losses.

In addition, having invested tens of millions of dollars in poultry & pig breeding as well as mega-farms construction corporate giants got into difficulties. Banks reconsider credit terms & conditions and sometimes reject (at least on the same conditions) granting borrowed funds for the final stages of projects. If we allow capital intensive businesses to go bankrupt now there will be no investors in Russian agriculture in the next decade.

Speaking of Belaya Dacha, as far back as three years ago its management realized that gas & electricity prices would rise and started preparing for a serious restructuring. Currently, we are practically free of ‘heavy’ assets that can weight us down. We retained assets which, hopefully, will not be influenced by the crisis. For instance, ready-to-eat packed fresh salads – primary Belaya Dacha brand carrier. We are leaders in this market section. In spite of the crises our production volumes increase, though the management admits that in spring when the crisis reaches its peak growth rates will slow down.

Let’s hope for the best. We can recollect even worse times. In this regard Russia is better prepared for crises compared to other countries. The main things I’d like to wish agricultural producers are to keep chins up, neither be in a flap nor lose faith, hope or love. We’ll manage to do everything if we don’t hang down our heads!



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