Despite the fact that in recent years the production of grains and oilseeds in Ukraine demonstrated the positive dynamics, and all market participants started gradually preparing for the harvest results of 100 mln tonnes, and improving their seed bases and quality of crop protection products, increasing their storage capacities and solving the logistics problems, there are a number of things that they cannot really control. For example, the unexpected and significant strengthening of the national currency rates in 2019, and the resulting losses of profit. But if increasing of the sales can compensate the risks, what about the weather factor, which recently demonstrated rather abnormal features?
Therefore, APK-Inform Agency talked with the Director of Finance and Operations at AGROTRADE Group, Olena Vorona.
— AGROTRADE Group is the vertically integrated holding with the closed agricultural production cycle. What are the priority directions of business activity of the company? What results has the company managed to achieve for recent years?
The company's history takes over 20 years. Initially, the company was focused on trading, but to date the agricultural industry is the main activity. Although, the holding is also developing the elevator sector, but the production of grains and oilseeds, including seed material, is the priority direction.
— In 2006, AGROTRADE Group began to cultivate land and grow grains and oilseeds. What land bank do you own to date? Are there any plans to increase it in the future?
The land bank of AGROTRADE Group totals 70.5 thsd ha. Periodically, we increase the areas, if we see vacant plots near the fields that our company already cultivates, we participate in auctions when agricultural land is being run, or if neighbors offer to sublease the land. However, intensive development of the land bank is not our priority.
— What crops do you grow on your farms?
We grow corn, sunflower seed, wheat, rapeseed and soybeans. We tried to grow different crops, for example, we planted lentils, and it was a very good experience. The crop does well in drought-burdened regions, but for two recent years, its price sharply reduced, making it unprofitable to grow. If the situation changes, we will be happy to return to the crop again.
— How did the structure of crops in your farms change compared with last year? And what role did the price situation on the domestic/export markets play in the situation?
Our crop rotation is stable, and the structure of planted areas in our company does not significantly change from year to year. In the current year, we planted corn throughout nearly 23 thsd ha, wheat — 20 thsd ha, the areas under sunflower seed will cover 15 thsd ha, while rapeseed and soybeans — nearly 4 thsd ha each.
The price situation is frustrating for us, because the prices of all crops significantly lowered, and I don't see any space for changes.
To put it bluntly, to date all crops are low-margin, so we keep the same crop rotation and try to take into account the recent market fluctuations in trading.
— Would You kindly share Your expectations concerning development of the situation in the second half of the season and forecasts of the spring planting campaign.
Probably, in the current year many farmers will try to realize the planting campaign earlier, while risking to suffer from the spring frosts, due to uncertainty at the depth of precipitation in the spring, and in order not to lose the moisture remaining in the soil after the winter period. In fact, agrarians make a decision intuitively: take the risk and plant earlier, without losing the moisture, or do not risk and hope for any rains. To date, the weather is very warm, and it may happen that in March 2020 the soil will warm up enough for the planting works. For example, corn crops can perish even in terms of the small freeze.
The planting campaign in AGROTRADE Group is planned for the period from April 1 to May 5. Everything will depend on the weather conditions. In the current year, the weather factor put us in the situation where we need to be very flexible and make decisions quickly.
We monitor the situation every day, and the final decision will be made after March 20. Perhaps, we will postpone the planting campaign to the earlier date, taking into account the weather forecasts and other factors.
— Your company also produces and sells reproductive hybrid and varietal seeds in Ukraine. How is the reporting direction developing?
We have been producing seeds for 10 years. The market direction is developed according to the needs of the market, se we change the list of hybrids at the request of our customers. We have a very high quality of treatment at the plant, and at the low prices, our seeds are in high demand among small-scale producers, who process nearly 500 ha of lands and want to get the stable income from each hectare.
To date, agrarians plant our Agroseeds seeds throughout more than 100 thsd ha in Kharkiv, Poltava, Sumy, Kirovohrad, Chernihiv, Dnipropetrovsk, Luhansk and Donetsk oblasts. Also, AGROTRADE Group plants seeds of our own brand throughout 90% of our areas.
— AGROTRADE Group owns the network of nine elevators with the general capacity of 570 thsd tonnes of simultaneous storage. How did the decision of the management of Ukrzaliznytsia (Ukrainian Railways) on the transition to block train shipment affect their work?
The imposition of block train shipment led to the fact that we had to audit the shipment rates of our elevators and invest additional funds in the equipment of enterprises. So, last year we reconstructed Chernihiv, Vorozhba, Hadiach and Doch-Khlib elevators, which resulted that they are able to load technical routes within two days. The elevators have the largest flow of grains and the longest delivery routes.
In addition, we achieved that the stations received the status of route stations. Unfortunately, we can not make all elevators route-based, due to the feasibility of such investments.
— In conclusion, thank You for Your informative conversation, and would You kindly share the company's plans for 2020.
We want to increase the efficiency and reduce costs. Generally, like any other agricultural holding, we strive to optimize our production costs, and the current decline of the global prices made us to do it even more actively. The automation allows us to solve two problems: reduce the costs and improve the quality of received information, excluding the human factor. All processes are closed automatically, and we have completely eliminated internal document management. It significantly saves time and costs.
Also, we started establishing the principle of crop rotation planning within the whole holding company, rather than any certain enterprises. It allows us to reduce machinery moving and the need for additional machinery, and in return — to increase the production.
Interviewed by Anna Tanskaya, APK-Inform Agency