“Varyag” plowed – Newspaper Kommersant No. 62 (7507) dated 04/11/2023

The structures of the ex-president of the UMMC Iskandar Makhmudov sold the Varyag agricultural enterprise, which is remote from the main agricultural assets controlled by the businessman. About 10,000 hectares in the Saratov region were acquired by Bio-Ton, the head of the Union of Grain Exporters, Eduard Zernin. The decline in grain prices and profitability in the sector does not reduce investor interest in agricultural land, but may affect the value of assets.

The Bio-Tone company and its CEO Irina Logacheva on April 6 became the owners of the Varyag agricultural enterprise in the Saratov region, follows from the data of the Unified State Register of Legal Entities. According to a Kommersant source, Varyag manages about 10,000 hectares of agricultural land in the region. The former owner of the company was KM Group LLC, which, through Violan LLC, is controlled by the ex-president of the UMMC Iskandar Makhmudov, whose fortune Forbes estimates at $ 3.6 billion.

“Bio-Tone” of the Chairman of the Board of the Union of Grain Exporters Eduard Zernin is considered the main producer of sunflower in the country. It also grows wheat, corn, barley, peas, etc., develops flour-grinding production. As of July 2022, it managed about 500 thousand hectares of agricultural land, which corresponded to the seventh place in the ranking of the largest latifundists according to BEFL.

Iskandar Mahmudov still has other agricultural assets. Cosminvest, which is 50% owned by Violan, managed 210,000 hectares as of July 2022, mainly in southern Russia, according to BEFL. And in November 2022, Investcom LLC, associated with the businessman, became the owner of the AFG National agricultural holding with about 180 thousand hectares of agricultural land, according to BEFL data as of last July.

The director of Sovecon, Andrey Sizov, estimates the average cost of agricultural land in the Saratov region at 40–80 thousand rubles. for 1 ha. Thus, the assets of “Varyag” could cost 400-800 million rubles. Eduard Zernin noted that Bio-Ton is constantly working to expand the acreage and business scale. At the end of 2022, the company also became the owner of a farm in the Stavropol Territory with more than 15 thousand hectares (see Kommersant of January 9). It was not possible to contact the KM Group; Investcom did not respond to Kommersant’s request.

The sale of Varyag is probably due to the remoteness of the farm from the rest of the land bank of Mr. Makhmudov’s structures. Director General of the Institute for Agricultural Market Studies Dmitry Rylko says that the isolation of part of agricultural land can cause inconvenience in terms of moving equipment and crop placement, and also increases the complexity of business management. Andrey Sizov, director of Sovecon, notes that for many owners of large tracts of agricultural land, one of the bottlenecks is the management team, which is difficult to find and which may not have time to control the entire business. According to him, 10,000 hectares is not enough to hire a separate team; 30,000-50,000 hectares are considered optimal.

Crop prices in Russia are now under pressure, including due to increased supply. As Sovecon wrote with reference to Rosstat, as of March 1, wheat stocks in agricultural organizations reached 17.4 million tons, which is 82% higher than the average value for five years. Sunflower stocks – 2.5 million tons against 1.7 million tons a year earlier. According to Rusagrotrans on the Pole.RF portal, in the first week of April, fourth-class wheat in the south and in the center of the country fell on average by 107–113 rubles, to 10.08 thousand and 9.02 thousand rubles. per ton, respectively. Prices for sunflower in the center, in the south and in the Volga region increased in the range of 1.7–3.2 thousand rubles, up to 20.6–21.5 thousand rubles. per ton. But, as Rusagrotrans noted, some oil refineries bought raw materials for the future, which is why demand may be lower than expected.

As Dmitry Rylko notes, the falling profitability in the sector has not yet affected interest in agricultural land and the value of assets. Investment banker Ilya Shumov points out that land remains a basic asset in agriculture and a significant drop in demand for it should not be expected. But, he does not rule out, some “cooling of prices” for land assets is possible towards the end of the year, if the situation on the crop production market does not change.

Anatoly Kostyrev