interview Sofia Yaroshenko 7.02.18
Jean-Michel Soufflet:
We Plan to Increase Our Production in Ukraine to 1 Million Tons
Jean-Michel Soufflet:
We Plan to Increase Our Production
in Ukraine to 1 Million Tons
in Ukraine to 1 Million Tons
INTERVIEW SOFIA YAROSHENKO 7.02.18
This is a family business, although it is represented on all continents, except Australia, and it has 61 plants around the world and more than 7 thousand employees. In an interview with Latifundist.com and Zerno magazine, Jean-Michel Soufflet, Chairman of the Management Board of the family-owned French group in food and agriculture on international scale, spoke frankly about the problems of the industry, the company's work in Ukraine, logistics peculiarities and presented his opinion on the land market.
Samuel Robard, CEO of Soufflet Agro Ukraine, Jean-Michel Soufflet, Chairman of the Management Board of Soufflet Group, Pierre Cothenet, CEO of Soufflet Group Europe (from left to right)
In Europe, it is extremely difficult for farmers to ensure stable profitability. Only enterprises that have an additional business or build an integrated structure following the example of agroholdings survive. What do you think, what is the future of farming in Western European countries?
Over the past three years, grain prices have been very low. Last year, the yield was low, and the year 2016 was a more complicated one among the others. Productivity has decreased by 30%, France is not used to such situations, since the climate is moderate and the indicators have always been stable. Yield decrease was particularly noticeable for small farmers. And if we talk about prices and quality, then, in terms of profitability, it was a difficult year for large farms as well.
The Soufflet Group activities in Ukraine are quite successful. What do you think about the prospect of 100 million tons of grain production in Ukraine? And will this result in delegating the basic production to the post-Soviet countries while agriculture of Western Europe will turn into a hobby? Moreover, in the Soufflet annual report it is indicated that the company relies on the Black Sea basin (Romania, Ukraine, and Russia).
I very much hope that agriculture of Western Europe will not turn into a hobby. This is a very good agrarian region. Of course, one cannot but agree that the Europeans and the French, in particular, are now spoiled. They have already forgotten what it is like to struggle every day for the opportunity to eat.
"French, in particular, are now spoiled. They have already forgotten what it is like to struggle every day for the opportunity to eat"
"French, in particular, are now spoiled. They have already forgotten what it is like to struggle every day for the opportunity to eat"
The potential of 100 million tons is absolutely achievable
Agriculture gave a lot for the development of my home country. Behind it, there is a huge industry.
In Ukraine people are more realistic. On the one hand, there is a large-scale production, and on the other — we see sensitivity and attention to sustainable development and environmental protection. It seems to me that Ukraine has taken a more advanced step, in this respect.
There is a balance between productivity and concern for the environment. And the potential of 100 million tons is absolutely achievable. It can easily be increased even as we speak by 20 million tons, but one should understand that this will inevitably entail the need for logistics improvement.
In Ukraine people are more realistic. On the one hand, there is a large-scale production, and on the other — we see sensitivity and attention to sustainable development and environmental protection. It seems to me that Ukraine has taken a more advanced step, in this respect.
There is a balance between productivity and concern for the environment. And the potential of 100 million tons is absolutely achievable. It can easily be increased even as we speak by 20 million tons, but one should understand that this will inevitably entail the need for logistics improvement.
Agriculture gave a lot for the development of my home country. Behind it, there is a huge industry.
In Ukraine people are more realistic. On the one hand, there is a large-scale production, and on the other — we see sensitivity and attention to sustainable development and environmental protection. It seems to me that Ukraine has taken a more advanced step, in this respect.
There is a balance between productivity and concern for the environment. And the potential of 100 million tons is absolutely achievable. It can easily be increased even as we speak by 20 million tons, but one should understand that this will inevitably entail the need for logistics improvement.
In Ukraine people are more realistic. On the one hand, there is a large-scale production, and on the other — we see sensitivity and attention to sustainable development and environmental protection. It seems to me that Ukraine has taken a more advanced step, in this respect.
There is a balance between productivity and concern for the environment. And the potential of 100 million tons is absolutely achievable. It can easily be increased even as we speak by 20 million tons, but one should understand that this will inevitably entail the need for logistics improvement.
One of the key problems in the Ukrainian agribusiness sector today is the lack of sufficiently flexible logistics solutions
One of the key problems in the Ukrainian agribusiness sector today is the lack of sufficiently flexible logistics solutions. For example, we could increase the production for our company, in Slavuta, by 20%. But we are not growing the production, since the logistics issue is not resolved. Further development would need logistic improvement. In such sectors as agricultural commodities production, where the value added is low, logistics is very much decisive for the competitiveness.
One of the key problems in the Ukrainian agribusiness sector today is the lack of sufficiently flexible logistics solutions. For example, we could increase the production for our company, in Slavuta, by 20%. But we are not growing the production, since the logistics issue is not resolved. Further development would need logistic improvement. In such sectors as agricultural commodities production, where the value added is low, logistics is very much decisive for the competitiveness.
What weak points do you see in Ukrainian grain logistics?
You know, we have been working in Ukraine since 2001 and are still looking for a port that would be reliable and perform its functions (laughs). In addition to problems with harbors, it is still necessary to remember the lack of train cars and containers within the country.
If grain is produced in different regions, it must be delivered to the port, and this is where problems arise, one of which is the lack of grain carriers. In the Ukrainian economic realities, businesses need to fight for them.
If we talk about the railway, transportation of small lots does not cause difficulties. But when there are lots of 100-300 thousand tons, everything is much more complicated. Logistics should be more open to the competitive environment.
Perhaps these are basic things, but we pay our agricultural producers based on the world prices, not Ukrainian ones. When logistics costs increase, the price paid to the farmers reduces. The lower is the cost of shipping, the more you can pay the producers. This is absolutely logical, and we talk a lot about this in France, since the scheme is the same as in Ukraine.
If grain is produced in different regions, it must be delivered to the port, and this is where problems arise, one of which is the lack of grain carriers. In the Ukrainian economic realities, businesses need to fight for them.
If we talk about the railway, transportation of small lots does not cause difficulties. But when there are lots of 100-300 thousand tons, everything is much more complicated. Logistics should be more open to the competitive environment.
Perhaps these are basic things, but we pay our agricultural producers based on the world prices, not Ukrainian ones. When logistics costs increase, the price paid to the farmers reduces. The lower is the cost of shipping, the more you can pay the producers. This is absolutely logical, and we talk a lot about this in France, since the scheme is the same as in Ukraine.
At what stage is the construction of the announced Illichevsk terminal now?
Yes, we announced this, and we also announced a tender, but it was not concluded. At the last minute, everything fell through. Now we are trying to solve the problem. It is about the transshipment capacity of 650 thousand tons, and up to 1 million tons for the future. Unfortunately, we are currently working with foreign partners. I would like to have more opportunities within the country. Our own port terminal in Illichevsk would solve many problems. And it is necessary for Ukraine. If we talk about the production forecast, then we need operators, developed port logistics. And we should ensure those in advance, because the indicators are growing very quickly.
"We plan to increase production here to 1 million tons"
"We plan to increase production here to 1 million tons"
What are the company's requirements regarding logistics in Ukraine?
Our logistics should be as flexible and competitive as possible. That is why we are focused on ports. You probably know that we have started malting barley purchase in Ukraine and over time we expanded the list of cultivated crops in order to enhance the development. But now it is necessary to develop the logistics component. In Slavuta, the construction of a loading point for rail transport has already been planned, so we will be able to load wagons. Construction of two more elevators and loading points is also planned. No matter what, Soufflet Group is expanding its activities in Ukraine.
Is the location for future elevators already known?
As long as we are talking about plans, it means that in France my employees from the agriculture department showed me these projects, but so far neither deadlines nor locations have been set. It will definitely be located more southern of Slavuta, between Slavuta and Odessa, but we will not disclose the exact place.
Once in a conversation Michel said that if his will, he would reduce the number of directions of Soufflet Group, since his father launched too many of them.
Indeed, in France we work in many directions, there are basically 10 different industries. And one reflects not so much on contradictions but on logic. The basis of our company is farm procurement, trading, as well as primary and secondary processing. Logically, it is necessary to develop trade, because there are sales markets.
There are also different industrial directions, such as processing, which is necessary for the company's development. If this is barley, then malt houses are needed, if we talk about grain, then flour mills are needed to produce various components for baking from own grain.
Roughly speaking, we are working in agriculture plus the main industries where it is involved, as well as grain trade. The team and the company's employees are very important for us. Removing one of the directions is like cutting off one's hand.
Roughly speaking, we are working in agriculture plus the main industries where it is involved, as well as grain trade. The team and the company's employees are very important for us. Removing one of the directions is like cutting off one's hand.
Right now we are all witnessing discord in the family-owned French company Louis Dreyfus. Is it hard to work in the family business, what principles and values do you follow? Do you often argue with your father about making decisions?
Talking about my relationship with father, I respect him deeply and greatly appreciate what he created. I do my best to continue his work and put maximum effort into it. We see each other every day. He comes in the morning and we drink coffee together. If we talk about work, then we are moving in the same direction. We are striving for the stable development of our company.
My father and I are the only two shareholders in Soufflet Group, and this is a huge advantage
The shareholders are not paid dividends here, everything is invested in development. We have one goal, but we can see different ways to achieve it. We have discussions about it. After all, we belong to different generations, and we have different education, upbringing, and experience. Of course, we agree on the direction and will move to achieve what we want.
My father and I are the only two shareholders in Soufflet Group, and this is a huge advantage. This is much easier than the Board of Shareholders or the Board of Directors.
My father and I are the only two shareholders in Soufflet Group, and this is a huge advantage. This is much easier than the Board of Shareholders or the Board of Directors.
The shareholders are not paid dividends here, everything is invested in development. We have one goal, but we can see different ways to achieve it. We have discussions about it. After all, we belong to different generations, and we have different education, upbringing, and experience. Of course, we agree on the direction and will move to achieve what we want.
My father and I are the only two shareholders in Soufflet Group, and this is a huge advantage. This is much easier than the Board of Shareholders or the Board of Directors.
My father and I are the only two shareholders in Soufflet Group, and this is a huge advantage. This is much easier than the Board of Shareholders or the Board of Directors.
How, in your opinion, will agriculture continue to develop? Will it develop towards vertical farms or artificial food?
I can say that in this world we will always need for food production. The need for food will only increase, because the world's population is growing. In 10 years another billion will be born. Everything will change, and this question is world-old. Perhaps people will eat less meat. Again, there is the theme of spoiled children of the Western world. I do not think that there will be radical changes. But the best days for agriculture are ahead.
The same situation was with Ukraine. Before the world wars, it was the breadbasket of Europe. Then the Soviet period came, when everything started to decline, and Ukraine fell out of world production. Now again, everyone started talking about its potential, Ukraine began developing actively. Some development takes place in the context of political changes. Therefore, we can predict that if Ukraine returned to this sphere, the same would happen with other countries.
The same situation was with Ukraine. Before the world wars, it was the breadbasket of Europe. Then the Soviet period came, when everything started to decline, and Ukraine fell out of world production. Now again, everyone started talking about its potential, Ukraine began developing actively. Some development takes place in the context of political changes. Therefore, we can predict that if Ukraine returned to this sphere, the same would happen with other countries.
Ukraine is on the way of opening the land market. What plans does your company have in this regard, and are there any risks as compared with France?
The price of land is one of the competitive advantages of Ukraine
The price of land is one of the competitive advantages of Ukraine because now in France, for example, 1 hectare of non-leased land costs EUR 20 thousand. I do not think that it is necessary to raise the price in this transitional stage.
If we talk about our plans, I have already said that we work in 10 different directions, and we do not plan to establish the 11th one. Although, the situation may change. But only in the case of buying a small farm to create demonstration plots to show Ukrainian producers the full range of our capabilities.
If we talk about our plans, I have already said that we work in 10 different directions, and we do not plan to establish the 11th one. Although, the situation may change. But only in the case of buying a small farm to create demonstration plots to show Ukrainian producers the full range of our capabilities.
The price of land is one of the competitive advantages of Ukraine because now in France, for example, 1 hectare of non-leased land costs EUR 20 thousand. I do not think that it is necessary to raise the price in this transitional stage.
If we talk about our plans, I have already said that we work in 10 different directions, and we do not plan to establish the 11th one. Although, the situation may change. But only in the case of buying a small farm to create demonstration plots to show Ukrainian producers the full range of our capabilities.
If we talk about our plans, I have already said that we work in 10 different directions, and we do not plan to establish the 11th one. Although, the situation may change. But only in the case of buying a small farm to create demonstration plots to show Ukrainian producers the full range of our capabilities.
Thank you for the positive interview!
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