Larisa Ignat
About the competition for farmlands in the South and the golden mean in the privity with shareholders
Let's assume that you are the director of an agricultural company that works in the risky farming zone, has got a pig-breeding farm surrounded by the ASF outbreaks, and the neighbouring companies are always happy to "bite off" any plot of your land. Have you got a good sense of it? Larisa Ignat, the Chief Officer of Agroprime Holding, that is a part of Agrain Agro Group, does not have to imagine it — she has been successfully working in such conditions for more than 10 years. In an interview with Latifundist.com, she brings up to speed on the method of optimism, the dialogue with shareholders and the employee motivation.
— So, how did you, being an expert in heat power energetics, come to be in the agricultural business?
— I was not just a power engineer. I worked at the heating plant of the Izmail canning factory. It was the third largest combine in the Soviet Union that processed food raw materials from the entire region. All nearby regions of Moldova also supplied that factory with vegetables. The factory produced such canned goods as green peas, vegetable marrow paste, eggplant, jam, juice, all together more than 70 items. The factory had a forty-six-hectare area under management, its water transport and railway. At the heart of it there was the Central Heating and Power Plant where I was working from 1979 to 2001. I started my career as an operator of chemical treatment of water and had a rise of the career ladder up to the Head of the Foreign Economic Department. The combine was a processing company, and, therefore, it was based on coordinated actions with the collective farms. Later, there appeared a factory that processed apples and produced concentrated apple juice. The juice was for export.
All those stages that I got through at the canning factory automatically led me to agriculture. You see, the factory was in a direct relationship with the producers. The factory collapse resulted from the collapse of the Soviet Union. The supply of fertilizers was set on the basis of the combine that cooperated with collective farms. And after a while, Agroprime Holding came into existence. We were well known at the local level, so it was no big deal to enter the cooperation. I got acquainted with the owner of the company years ago at the canning factory, and that was he who offered me the position in the company. Later on, the former employees of the combine came to work to Agroprime Holding.
— In fact, you stood at the origins of the company.
— I believe so, I am with the company since its registration in 2005. By the way, you know, a lot of my friends were surprised and shocked to learn that I was just a mercenary manager, but not the owner. All these years I did not treat this company from the position of an employee. I just love it so much, everything is dear to me — every shareholder, every land plot and construction project. And we started, in fact, from scratch. So, everything grew rapidly, I even did not have time to realize that 13 years had already gone by.
— What were these 13 years?
— All these years were devoted to the search for the golden mean in an attempt to satisfy the shareholders with the company policy, the rental payments and the social programs. After all, today the holding is a major budget revenue generating company for many districts of Odessa region. Last year, the tax bill, which was remitted by the company to the budgets of all levels, came to about UAH 40 million. According to the data of the tax office, the share of the income tax duty on the leasehold land of the company in the Izmail district is 40%. The same pattern is in other districts. For example, in Bolgrad district the company cultivates 10% of the land, and the share of the income tax duty on the leasehold land of the company in the district is 27%.

At present, at the discretion of the governor of Odessa region, Maxim Stepanov, the memoranda of the income tax on the leasehold land, which were signed up between agricultural producers and village councils, impose the relevant tax at the rate of about 8% of the regulatory monetary value of land. At the meetings, the local authorities ask the same questions: "Will you sign up such a memorandum? Will you be the part of this process?" My response is always unambiguous: it goes without saying, we will, because we have already been paying out so much and even more. Today's rate of interest on the leasehold land is 16-18% of the common land charge value. These are our planning figures without taking into account the prices for corn and sunflower. Rental payments are made in different ways, that is, people get four types of grain. For many people this payment is what they have been waiting for a whole year in order to breed animals or provide themselves with coal for winter.
— What are your views on the re-registration of the leasehold land? Is it a periodic or onerous process?
— This process is pretty continuous. Today there is a lot of talk about the extension or the lifting of the moratorium on the sale of farmland. The company is carrying out explanatory work with its shareholders to help them order the land parcel documents. The lawyers of the company visit the localities, and, together with the experts of the land department, organize the reception of the citizens, enlist the services, consult on the recent changes in the legislation.
— What is the course of share-based payment?
— It is the shareholder who determines the amount of grain and the quantity of money he wants to get for his share. The company organizes the delivery of the share grain to their homes; the money is paid straightforwardly in the barn. The colleagues from other regions mention that the monetary payment is more typical there, but the shareholders of our company prefer grain. The shareholders get about a half of the shares in grain, because today it helps managing a household.
— What about the business competition for the land bank?
— The business competition is always good for local communities. Since the company came to a market, a lot of our business rivals are forced to reach after. There have been cases when local farmers did not pay out any shares for years. Those local farmers usually explained that because of the scanty harvest they were not able to pay out, and the shareholders had little alternative. And there were such villages where the people wanted our company to step in, they said: "Larisa Ivanovna, come and voice your conditions. Our local residents want to lease the land and cooperate with you." And on the very day, when the meeting was supposed to be held, the farmer paid the money he had not paid for 2 years. Our company made others be bright-eyed and bushy-tailed. Today the company is in unequal conditions in comparison with those who work off the books. Every hectare and every ton of grain, which belong to the company, are registered. The company does not carry on trade with unregistered grain. Every employee is employed in the company, gets a respectable salary and wage supplements.
Agroprime Holding, in its turn, does its best to ensure that shareholders are satisfied — both with the policy of the company and the amount of grain per share. The company provides the employment opportunities, pays out a competitive salary and, thus, the employees defend and protect its interests. It happens that a person manages a private household and at the same time is a shareholder. He gains a good income, the company provides him with treatment or recreation, his requests are met, yet the amount of grain he is given to a share is of high importance. This is the psychology of the village residents.
— Are the neighbouring companies set for paying out 16% leasehold land rent?
— They do pay out, otherwise people would not cooperate with them. A lot of farmers cultivate the land of their relatives. In this case people are more sensitive when it comes to payments. No one affords losing a ton or two of grain. Another issue is that today the majority of farmers forget to mention this very grain for their shareholders in the accounting documents. Whereas our company always makes reports and pays all the taxes.
— Can you estimate the yearly cession of land?
— We started our economic activity with 7 thou. hectares, and then increased the land bank gradually. This happened mainly by means of farms, which, for example, carried out sowing in autumn but could not make it through to harvesting, and thus decided to sell the assets. There were bankrupt farms and some were on the verge of bankruptcy. In just a few years, the land bank increased to about 24.5 thou. hectares.

Today the company has got more than 22 thou. hectares in 5 districts of Odessa region. Of course, the business competition is serious enough, and, unfortunately, it can be mala fide. Mostly it is because of the unregistered landholders. They think that the facts of their being locals and owning 100-200 hectares of land are enough to have the upper hand. Today these landholders are strong and full of energy, they have a resource, although, as you have understood, a shadow one. A lot of them even do not report that they lease land.

Most of their shareholders pay a unified agricultural tax, as if they cultivate the land independently. And this tax is two times less than our holding pays today as a company.
— Does the company intend to increase the land bank?
— If it happens, it will definitely be within the districts of our presence. As a matter of principle, I see both the prospects for further development of the company and the relevant personnel resource, which can meet deadline to a good quality. But then again, the question that has to be answered is related to the operational efficiency of work on already existing leasehold land. The company focuses on quality rather than quantity. Although, if there are production capacities, and, at the same time, there is a possibility to increase the land bank, then, of course, we are working on the issue. For the time being, the company needs to regain its previous positions and to intensify the activities in those districts where the company has good production capacities.
— It is not infrequent that farmers copy the cropping pattern of the neighbouring agroholdings. Are your conditions exactly the same?
— Today, farmers are very serious about their own business. They attend seminars and field days of leading agribusiness companies. The whole families come to introduce children to the business. Their companies are well equipped, they are not eager to chase the quantity; the only thing they want is quality. In addition, they use high technology. Back in the old days, when we had a condition inspection, I was sure if the field was well-tilled it was ours, but now I realize that well-tilled fields are typical for a lot of companies.
— Did the company suffer from share hunters who serve the appetites for farmland of those ready to pay?
— There are such experts in the staff of the rival companies. They are engaged in the increase of the land bank and do not mind taking over our assets. There were those who signed up a leasing agreement for 49 years. They did it in an incomprehensible way and, of course, there were some pay-outs. The company was in the process of building its facilities, and it was impossible to pay out for long-term leasehold lands in advance. And over the past 2 years, advance payments were made. Taxes were paid in the amount of more than UAH 10 million. This money was taken from the working capital of the company.

Unfortunately, necessity knows no law. Landowners fall short of a lot of things, for instance, of treatment or other urgent needs — they are looking for any source of income. We analyzed the situation and realized that people on a finance search come to our competitors and draw on in advance, renewing the leasing agreement. And that was a common scenario. Subsequently, the company started paying out in advance, and people found the terms more euphemistic because, on the one hand, they still have a leasing agreement, and, on the other hand, they remain the owners of the land. And there were the cases when a person confessed that he no longer owned the land.
— Did you face the cases of dual registration?
— There are cases when the companies file a lawsuit because of the dual registration of emphyteutic lease. They do not want to wait until the expiration of the agreements, although we have the right to work for another 2-3 years. These people go to the court and try to invalidate our registration.
— Tell us about the crop rotation in Agroprime Holding. What is the cropping pattern?
— Our company places a priority on winter crops. The south of Odessa region is a risky farming zone, and spring crops cannot always show a good result. In Odessa region, corn, as a rule, is under drip watering. Unlike the cropping pattern in Chernihiv, Zhytomyr and Cherkasy regions, spring crops are sown much less because of the poor yield risk.

The main crops are wheat (10 thou. hectares), barley (2-3 thou. hectares), rapeseed and sunflower. But if the conditions for rapeseed become rough, then the prepared soil is used for sowing spring crops. Two years ago the company grew soy. It is not traditional for our region, and the yields were of about 2 t/ha. Today the company also focuses on fodder crops; we store up the feed for animal breeding and for the paying-outs.

Feed is produced at the compound feed mill, the company buys only premixes. We also have a silo-type elevator with a capacity of 10 thou. tons, where the feed is stored. And there are additional storage facilities.
— The Agrarian Ministry and grain traders have recently signed up the Memorandum on the export of grain. At the same time there have been a lot of discussions whether there is enough grain in Ukraine. What is the situation with wheat in Agroprime Holding? What is the ratio of the food-class wheat and the fodder one?
— According to the cropping pattern of our company, wheat covers 10 thou. hectares. Thank God, the rains, which were during the harvesting period, did not do any harm, and we collected the high-class wheat almost all over the fields. In terms of food-class and fodder wheat, the ratio is close on fifty-fifty.

Due to the fact that a very large amount of grain is used for animal breeding, we have no problem with the procurement of fodder. Therefore we cultivate the food-class wheat every year. The high-class wheat is for export. Of course, the company is interested in the high class, because the class influences on the difference in prices, and this difference is essential. Today not all shareholders of our company want to get the fodder wheat, a lot of them are interested in the food-class wheat, which can be used for flour production, or can be sold to bakeries. Thus, they take the share in the form of the food-class wheat, sell it and then during the year buy some bread, which is delivered to the villages.
— And what was the ratio last year?
— Last year the weather conditions did not influence on the class of wheat. By the way, in 2016, almost all wheat was of the 2nd and 3rd class. It was necessary to leave some wheat for fodder, but it was not enough.
— Larisa Ivanovna, crop production most often dominates the agricultural production of Ukraine. But that does not work for the company, does it?
— Animal breeding was inceptive for the entire Agroprime Holding. The task was to build a farm, a livestock breeding complex. The construction of the complex was accompanied by the formation of a land bank, which increased with every coming year. Today, crop production and animal breeding are almost inseparable.

The entire fodder group is own products. Animal breeding generates income throughout the year and this very income is a working capital for crop production. Our company still owns a small farm in the Tarutin district. The number of pig stock is 2000, but there are no breeding pigs, only feeding and fattening. That's why we buy some piglets, when it is necessary.

Also we have a 1500 sheep stock. It brings some profit, but the sheep stock is limited by pasture area. The company leases 250 hectares from the Berezinsk village council. Certainly, we sow alfalfa, put it in bales and then use it as feed; this also limits possibilities of increasing the sheep stock. But together, complementing one another, these two directions make the farm in the Tarutin district profitable.
— What is the production volume of the pig complex?
— The one-time maintenance is about 16000 head and the yearly productivity is 30000 head. The animals are ordered by their age. Last year the results of the complex were encouraging, I mean both production and income.

In 2011 we earned the status of a stud farm. We work only with the French selective breeding of animals; there is a constant genetic renewal. The Large White and the Danish Landrace are bred at the farm. We sell the vaccinated pigs, when weighing 70-80 kg, on the entire territory of Ukraine. We are very pleased that our customers succeed in business and come back to us, endorse us to their partners, and even consult the experience.
— Do you plan to enlarge the livestock of the pig-breeding farm?
— Yes, we are considering the option of increasing the livestock; this would obviate the need to buy piglets for another farm. Today we have 200 sow pigs, they farrow about 6 thou. piglets per year, but we still need a little more. Maybe we get another 100 sow pigs. And, in total, we get 9-10 thou. piglets per year.
— Have you ever worked with the Ukrainian selective breeding?
— At the outset we focused on the imported breeds. In the initial stages we bought the pigs from England, but mainly we were and are working with the French selection. We considered various options. A meat breed finds a ready market today, and our task is to breed what the market needs. The majority of customers like larding pork, but when they go to the market, they choose low-fat pork, and this product is the result of a pure genetics. Unfortunately, the Ukrainian selection of both livestock and crops does not receive enough funding, and a lot of high-potential employees just leave the country and work abroad.
— At what distance are the nearest ASF outbreaks?
— The nearest one is 8 km away from the pig complex. The experts are studying all possible methods of ASF control, and, of course, a number of additional measures are being taken. The situation is critical. The pig complex has been running in closed detention for three years already. We have invested a lot into biosecurity and still work on it. Almost all worksites are provided with the disinfectant barriers. No technical equipment enters the area without special treatment.Also, we are considering the option of rotation based work, because the employees of the complex come from 11 localities. Of course, they go through a sanitary inspection room, take a shower, then they wear work clothes. Moreover, the corporate canteen is at their service. The security service checks if the employees keep pigs at private households. This item is directly stated in the work contract. Instead, each worker is given 5 kg of pork a week. The loading ramp is external which helps to limit the entry of vehicles at a radial distance of 300-500 m from the complex.
— Have you ever turned to the foreign experts to solve the problem?
— Yes, indeed. We constantly consult the foreign experts, cooperate in terms of sale and delivery of vaccines, veterinary preparations, premixes. But at the state level, there are not enough measures to localize this problem. Today the purchasing price for a piglet in the ASF area is much higher than the procurement price for a large pig. In the ASF area people put up pigs for sale, but at the same time they quietly try to transport the piglets for 30-50 km and make a profit. And in this situation we are sitting on a volcano. Our employees realize that if they do not observe security measures today, they will lose their jobs and, thus, a stable income tomorrow.

Today the veterinary service has no right to enter the yard, if the owner opposes. Even if they hear the animals, the owner can say that he has none and will not let anyone in. The state must provide these services with legal power. I mean not only the inspection, but also deprivation, if necessary.

A little spark kindles a great fire. It seems to be the fire already and it has been burning throughout Bessarabia for the second year. It is necessary to settle the issue of guarantees that compensation in money will be paid. And the price of a large pig and a piglet cannot be the same. The price factor leads to such actions when the population is trying to hide and then sell domestic animals.
— Tell us a little bit about the collective body of the pig complex.
— The collective body is very good. The employees who have been working on the pig-breeding farm since the opening are the core of it. The requirements of the technologist are quite high — the employees must be responsible and conscientious. The complex was commissioned in 2011 and the equipment requires constant preventive maintenance. In order to make this business profitable, the work must be well organized from the cleaning staff to the Chief Technologist. Our experts take part in seminars, conferences, and even study to improve their professional level. And they are interested in working in the company; they realize that the company is interested in their professional growth.
— What volume of products is for domestic consumption and what is for export?
— Our company was one of the first to start exporting pork to Georgia. In geographical terms, it is convenient: the ferry goes to this country from the maritime terminal of Illichivsk. Today a lot of companies have followed in our footsteps, and some have even opened up the farms in Georgia. We used to supply to Moldova, but due to the ASF hotbeds, the trade was cut off. The number of breeding animals for export was significant. Today we come only into the inner market.
— How does the company fight against stealing?
— We use the GPS control system set on all types of vehicles, flow-type sensors, fuel consumption control, seeding rate control, fertilizer distribution control. There are bonus awards for saving resources and penalties for misallocation.
— What ways of charging up the employees do you use?
— The company has made up a bonus plan for all types of work activities. There is, for instance, the minimum wage for those who work in animal breeding. Every week the following operating data are monitored: animal yield, livestock savings, weight increasing, ups onto the ramp. There are target figures, but we also take into account the factual data and, depending on them, the accounting staff makes the weekly calculations. Within a month, some employees get up to 300%-allowance.

The same scenario is in crop production. The money one can earn consists of two components. There is a guaranteed minimum, and there is an allowance depending on quality and timeliness. For instance, if the agronomist and the engineer confirm that the employee properly operated the machinery, the accountant confirms that the employee does not have any excessive fuel consumption, then the appropriate document is signed and the accounting staff makes the calculations of both the wage and the allowance. This is a very good quality control procedure.

Agronomists are motivated according to the year balance of the work, taking into account the crop yield and the profit per hectare. The bonus fund is determined by the management of the company. Everything depends on the financial result. 2017 was not the most prominent year — the profit was at the level of UAH 1.5 thou. per hectare. Approximately the same result was in livestock breeding. In 2016, the profit was 2-2.5 times higher.
— What is your vision of the company's development prospects?
— We need seeding material. Therefore, we plan to bring the seeds up to the standard at our own facilities. We have already brought a proposal to the holding company. That proposal was supported. By the next season the issue of site selection, purchase and installation of the equipment will be decided. We need 2.5 thou. tons of pure, calibrated and treated seeds. We will use the elite seeds to produce the own ones.

But the jewel in the crown is the bulletproof personnel. The members of the team have known each other for many years, and they respect each other. There is no high personnel turnover. And, as the employees joke, the only day off is once a year — that is Christmas. After the new crop is harvested, the preparation of the soil starts, and then the delivery of grain to the shareholders, and then sowing starts again. Hup! Once again —

the harvest time and the sowing campaign, crop monitoring, it's happening over and over. But, be that as it may, the agrarian sector remains attractive and very promising.
— Thank you for the inspiring conversation and good luck with your projects!
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