Lured by soaring food prices, corporations - both domestic and foreign - have been snapping up land in this fertile region the size of France, replacing inefficient Soviet-style collective farming with modern farming techniques and economies of scale.
“Foreigners who come here get astonished at the gleaming black earth,” said Viktor Karnushin, head of a local subsidiary of Sweden’s Black Earth Farming corporation, one of the biggest foreign players in Russian farming.
As with timberland, while direct ownership and management (i.e., being a farmer), is a possibility, such a route is similarly fraught with difficulties. One of the most significant of these is the issue of diversification in the farmland itself - especially with a single investment. A well-diversified holding of farmland (row crop, permanent crop, pasture and even timber) will, therefore, not only require a significant investment, but may also involve land holdings in a number of different locations.
A decade after capitalism transformed Russian industry, an agricultural revolution is stirring the countryside. The change is being driven by soaring global food prices (the price of wheat alone rose 77 percent last year) and a new reform allowing foreigners to own agricultural land. Together, they have created a land rush in rural Russia.
“I am satisfied with what we have achieved during the first half of 2008. We have been able to combine a fast increase in land under control with successful operations. The harvested area is estimated to be approximately 53,900 hectares with an estimated harvest of approximately 150,600 tonnes, which is higher than expected.”
Investors are plowing money into Russia’s open lands to resuscitate the long-neglected farm sector and supply a world in ever greater need of food.
Companies listed on European exchanges have been acquiring large amounts of farmland in Russia
Les compagnies étrangères cotées dans les bourses européennes achètent activement des terres agricoles en Russie
The fund’s strategy is to own and manage funds which operate in largely unsubsidised farming countries and are among the lowest cost producers of their chosen commodity or livestocks.
Beijing is adding agricultural investments to its “go outward” strategy, under which domestic businesses are encouraged to venture into foreign markets.
“Look at the colour, what a beautiful crop,” says Richard Spinks, pointing to wheat and rapeseed fields that his company sowed this season in western Ukraine. “If all of Ukraine’s farms could produce the yields we are getting, this country could play a big role in feeding the world and establish itself as a geopolitical power,” says the British chief executive of London-listed Landkom.
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