David Ananyan: By the End of 2020, A.G.R. Group Crop Production Will Cover up to 50 Thousand Hectares

Nelia Vasilieva
In early July 2020, Misak Khidiryan's A.G.R. Group commissioned the first phase of a new elevator complex in Seredyna-Buda town in the north of Sumy region. Thus, the company increased its grain storage capacity up to 83 thou. t. Elevators are not the only investment for the company. Agricultural holding operating officer David Ananyan described the specifics of the project implementation, dwelt upon further plans to enhance elevator capacities, increase the land bank and other directions of the company development.
How much has the company invested in the new grain elevator?
— The company has vested about USD 17 mln. In fact, the launch of the first phase of the elevator complex is the most expensive part, as it implies investments into the infrastructure (railway line, power networks, etc.). The project is designed as a route elevator. The facility can simultaneously receive and ship up to 1.5 thou. t of grain per day. It is also possible to ship 54 rail cars or 3 thou. t of agricultural commodities. Besides, due to the installed grain dryer, the enterprise can, for example, bring corn with a humidity of 24% to standard 14%. In general, the 112 thou. t complex requires 4.5 MWh of electricity. All this, of course, is a big investment.
How much will be invested in the second and third phases?
— About USD 24 mln will be spent on the second and third phases.
In a crisis, businesses put their investment projects on hold. Was the decision to launch the elevator tough for the company?
— I trust this decision was not an easy one for the owner. After all, the year 2019 was quite difficult for the agriproducers: the drought resulted in a lower yield than expected. But the owner decided to construct a grain elevator. There are few route elevators in Sumy region. And the company cultivated 5 thou. ha of farmland in this region. Accordingly, it is necessary to transship about 50 thou. t of grain. Without its own elevator, it was a complicated matter for the company.

Moreover, we plan to increase the land bank in this region to 20 thou. ha. So, storage capacities are essential both for our own needs and for rendering services to neighbouring farmers and agricultural companies.
Are there plans to increase land bank up to 20 thou. ha only in Sumy region?
— Farmland in Sumy, Chernihiv and adjacent regions is of interest.
What challenges did you face during the construction of the elevator?

— It was waterproofing because of high groundwater level. But we applied the advanced waterproofing system, which does not let any moisture in at all.

Another thing is that the site is far from civilization and all materials (crushed stone, sand, etc.) had to be delivered by rail. We refused from using piles in the construction since it was very costly to deliver them by rail. Therefore, we made a filled foundation. For this purpose, a concrete production unit was installed at the site. There was also a laboratory for checking the quality of concrete. After all, the filling grout was not a common one, it was strong.

I am confident that we have successfully coped with these challenges.

What was the choice of a Swedish equipment for a new elevator dictated by?
— This choice was preceded by a tremendous work. We held a tender, after which we went around numerous elevators both in large agricultural holdings and small farms in Poltava and Vinnytsya regions. The Swedish company Tornum offered not only equipment, but also the technological scheme to get the maximum efficiency. The company supplied a powerful drying system with a capacity of 1300 t of corn per day. A transport system was selected so that there would be no loss in productivity or energy efficiency. The dryer is equipped with an intelligent control system to avoid excessive grain drying.
For railway loading, two bunkers were installed adapted for any type of rail cars. Also two buffer silos with the capacity of 1000 t each were installed at the complex. This is very important, because when the elevator takes a sizable volume of corn of different humidity, in the buffer silos this parameter is equalized. This technological solution provides for maintaining a high drying capacity while using the optimum amount of gas.

The supplier started assembling the equipment in late November. Under the contract, 144 days were allocated for construction works. They did it within the agreed time.
The first phase capacity is 28 thou. t of grain. What grain volume is expected to be shipped in the first season?
— Approximately 40-45 thou. t, i.e. we will do one and a half turnover. Besides, there are already many people willing to use our storage facility.
Are those mainly farmers?
— Yes. In fact, the capacity of the elevator is not as vital as how much grain can be taken in and shipped. After all, it is possible to stockpile 100 thou. t of grain into the storage, but at the same time to ship 8 rail cars per day. That is why it is highly advantageous that we have a route elevator with high throughput capacity.
When is the second phase of the elevator scheduled to launch?
— For starters, we will load the capacity of the first phase. And, I think, next year we will start the construction of the second phase.
What other plans does the company have for the near future?

— Next year, construction of an elevator complex of the same capacity will start in Poltava region. The company manages about 20 thou. ha of farmland in this region. Indeed, there are many third-party elevators in the region, but we do not have our own. And this, as I have said, intricates crop production.

Today the company has three sites for the construction of grain storage facilities in Sumy, Kyiv and Poltava regions. And this year we plan to finish the design works and execution of documents to start the construction next year. The terms of implementation will depend on the attracted investments.
From where will the funds be raised?
— We are in talks with partners, funds, foreign banks. On the whole, financial institutions are open for cooperation and ready to credit.
Yet the company used its own resources to construct the first object in Sumy region.
— It did. We adhere to the same principle in other directions: the owner invests his funds in the first object, thus demonstrating the financial solvency of the company. And for further development and expansion, we attract financing from banks.

Clearly, work with banks has its own specific nature. For example, to raise USD 10 mln out of the required USD 17 mln, one needs to provide two or even three times more collateral. But we did not want to attract financing for the first object on such terms.

Unfortunately, monetary policy in our country does not quite protect banks from unscrupulous borrowers. But we do hope that over time a business that creates jobs, pays taxes, will have access to cheap resources to grow. Because it is practically impossible to develop intensively only on one's own.
Will the construction of the elevator in Kyiv region also start in 2021?
— We purchased the construction site in Kyiv region 5 years ago. So, there is a place for construction. But whether we build or not will be clear in time. We are now negotiating the acquisition of lease rights for the land of one company in Kyiv region. And this company has an elevator. If we do not reach an agreement, we will build it.
In the coming 5 years, how will the land bank be grown?
— By the end of this year, we should increase the land bank to at least 50 thou. ha. We are working on it, negotiating.
By the end of this year, we should increase the land bank to at least 50 thou. ha
In which regions does the agricultural holding develop crop production?
— In Chernihiv region, there are about 5.2 thou. ha in Novhorod-Siversky and Semenivka districts. In Kyiv region, our fields (about 6 thou. ha) are located mainly in Brovary district. In Poltava region, A.G.R. Group rents farmland in Grebinka, Pyriatyn and Lokhvytsia districts. In total, the holding cultivates 28.8 thou. ha. We grow corn on 21 thou. ha and soybean on 7 thou. ha.
How profitable is the company's livestock production?
— It does well. It really is a profitable direction. Unlike other holdings, we do not reduce the number of cows, but plan to increase it. Today, there are 530 milk cows out of 1.4 thou., about 850 are dry.

By the way, local authorities encourage development of livestock farming since the situation with milk, or rather, its absence, in some regions is nothing but critical.
What is the key to profitability in livestock farming? After all, there are few who have found it.
— It is all about approaches. When we started operating a farm, we also thought we would slaughter cows. Then we started considering it carefully, we went deeper and realized that the dairy branch had to be developed. The first thing we did was to move away from the calculation: one cow per one hectare of land. Because if you allocate a hectare of land for a cow, you will need 1.4 thou. ha. If this area is cultivated and the costs are compared to the cost of milk, it is far from profitable. Therefore, for 1.4 thous. cows we allocated 675 ha for perennial grasses and silage. The yield in the farm is 21 liters per cow, 19 liters per cow if forage are included. Quality milk indicators are also high: 3.7% of fat content, 3 grams of protein per 1 liter. For such indicators, the farm receives an additional payment.
Dairy Cattle Breeding in A.G.R. Group: Are Prospects Worth the Risks?
Dairy Cattle Breeding in A.G.R. Group: Are Prospects Worth the Risks?
At what price do you sell milk to processors?
— Until late May we sold at UAH 10.8 per liter. Now about UAH 10.4.
What are the plans for the expansion of livestock farming: build, buy farms, animals?
— It is rather purchase existing farms to fully restore them and launch them as fully updated. If we need to buy cows, we will do it in Ukraine, not in the Czech Republic or Germany.
Does the company focus on dairy farming only?
— We have meat cattle too. Meat is offered for processing to partners in Poltava region. They have a plant for the production of meat semi-finished products with a daily capacity of 100 t. The company produces frozen and chilled food with storage period from 15 days to 2 years.

In addition, we develop horticulture.
How so?
— The company has rented 175 ha of gardens for 49 years in Myrhorod district of Poltava region. We have cleaned the land and we will have to sow grains for 2-3 years to prepare the soil. The fact is that these plots of land were not cultivated for more than 4 decades. Once we prepare the land, we plant a garden, perhaps install greenhouses. We are still calculating, analyzing. I must admit, it is expensive. After all, to set modern gardens we need to use anti hail sheeting for garden etc. We went to the Netherlands and Italy to adopt foreign colleagues' experience.
Will it be an apple orchard?
— By no means. The domestic apple production is scaling up. Besides, Poland is close and it can fully supply the country with apples. We will consider which fruits or berries are in demand in Ukraine. And, on this basis, we will choose the crops.
What investment is needed to start a garden?
— It takes EUR 50 thou. per hectare. And don't forget about building storage facilities for fruit products.
We wish you luck with new projects and thank for an interesting conversation!
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