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. Last Updated: 07/27/2016

The British Are Coming

MTColin Hinchley, general director of Heartland Farms, made his mark in Russia by growing giant sunflowers.
Under a project run by a British-based company, British farmers seeking new opportunities are coming to Russia to establish farms on rich but idle agricultural land in the Penza region.

When Scotsman George Green visited Russia for the first time in 1997 to appraise a small project in the south, he immediately fell for the land and the people.

"The moment I came to Russia, I just felt something about the place that really, really appealed to me," the 40-year-old farming contractor said in a telephone interview from Scotland, where he is finishing his contract job within the next year before moving to Russia to grow crops in the Penza region.

"It is a culture that really does interest me and the challenge of Russia appeals. I immediately liked Russia as a country, I liked the people. I feel there are opportunities there -- the partnership of Western technology and knowledge and the Russian labor force, raw material resources, land. It interests me. The challenge interests me."

Green will be among the first of dozens of British farmers who are expected to start tilling land in Penza within the next five years with the option of staying long-term.

The project, which receives no funding from the British government or the European Union, is managed by Britain's Heartland Farms Ltd. through its 100 percent-owned Russian branch.

The project has the support of the Penza administration, which sees its potential for bringing jobs to the region and raising tax revenues. Despite Penza's rich black earth, much of its land now stands idle. Most farms have little money to invest in new machinery and have trouble staying in business.

The Agriculture Ministry also is on board. "The Agriculture Ministry is in favor of a project that approves the lease of land by foreigners who want to work it, especially land that stands idle at the moment, on the condition that it is used for agricultural production," Alexander Rasskazov, head of the entrepreneurship, farms and cooperatives development department in the ministry, said by telephone. "We would welcome them even more if they bring new equipment and demonstrate new technologies."

From the 2.4 million hectares of arable land in the region, the British farmers will receive tracts ranging from 3,000 hectares to 10,000 hectares on sublease from Nottinghamshire-based Heartland Farms, which is leasing land from the region and local farms for up to 49 years. They will start with growing cereals.

"It's a long-term project. It is not a quick fix, nothing will happen overnight," said Heartland Farms general director Colin Hinchley. "We want to build in a strong platform for the future. If this project is successful, it will outlive all of us."

The British farmers will operate under the umbrella of Heartland Farms, which will "hold them by hand" during their first five years in Russia, Hinchley said. For a "minor fee," the company will provide the farmers with legal and accounting advice, lease them Western machinery and supply seeds, fertilizers, chemicals and anything else needed for successful farming. It will also arrange accommodation for the farmers and provide them with interpreters and insurance.

To establish a business, each British farmer or consortium of farmers will have to invest about $500,000 of their own money per 5,000 hectares and -- also via Heartland farms -- register their own Russian company.

The size of the company's investment into the project is not something Hinchley would reveal, but he did describe it as "substantial," adding that Heartland Farms is prepared to arrange a $120 million line of credit -- from a European bank he declined to name -- for the farmers to obtain machinery.

The crops produced by the farmers will be contracted back to Heartland Farms to be marketed through its pooling system, Hinchley said. The system is already in place, created by Heartland Farms' shareholders who have been involved for the past 10 to 20 years with grain trading in the Soviet Union via state channels and within Russia as private grain trader Matrix.

"The pooling system is basically like a kolkhoz," Hinchley said. "Grain from, say, five farms goes into the designated silos for storage. We, as a marketer, enter a contract with buyers and sell it as a group rather than from each individual farm. It offers greater security and saves costs."

Hinchley said he believes most of the crop will stay in Russia because the country offers a large market. He cited barley as an example. "There's a big expansion in breweries. But at the moment Russia is importing 640,000 tons of malt, which is crazy. There's all this soil here and the people with expertise to grow it, yet it's being imported."

Next year, Ochakovo will open a $100 million brewery in Penza and is also building a $50 million malt factory in Lipetsk.

"Of course our company is interested in a long-term relationship with barley growers," said Ochakovo spokeswoman Svetlana Luzgina. "Why don't these Brits contact our marketing department right now with their suggestions?"

A boost in grain production could aid the revival of poultry and animal farms, Hinchley said, adding that investors now prefer to buy processing enterprises, while not putting a lot of thought into the primary production base. As a result, many have to import raw materials. "You've got to get the base going first," he said.

Matrix still operates in the region and has established working connections with local transportation and fuel companies and grain warehouses and, important in Russia, has developed good relations with the local administrations.

Hinchley said the first farmer from Britain is expected to come over in July to sow winter wheat, and Heartland Farms expects to have about 80 farms throughout the western part of the Penza region within the next five years. Farmers should be able to return their initial investment within three years, he said.

How It All Started

Hinchley is not new to the game. Before coming to Russia five years ago, he worked in various farming structures in Nottinghamshire, in the East Midlands of England, for 20 years. He was runner-up in the U.K. Farm Contractor of the Year competition in 1995, going on to win it two years later.

Hinchley also has something to be proud of in Russia: a demonstration farm in Zalesnoye, in Penza's Kamensky district, which he got involved with at the request of local authorities. He grew enormous sunflowers last year and eliminated most of the weeds.

Agriculture officials estimate that between 20 million and 30 million hectares of arable land in Russia have been abandoned by farmers in the past decade and subsequently overrun by weeds. At Zalesnoye, Hinchley managed to reclaim 1,700 hectares.

"He worked very well here," said Anatoly Tereshkin, a tractor driver from Zalesnoye. "We had 420 weeds per square meter in our fields. Imagine ... how many nutrients are eaten by weeds. With his technology, Colin coped with perennial weeds completely, and if he'd stayed on, would have gotten rid of the rest."

Tereshkin said Western technology and machinery helped Hinchley grow huge sunflowers and achieve a yield of four tons of winter wheat per hectare, up from the farm's previous yield of 1.9 tons per hectare.

Hinchley says four tons could be a norm for the region and six tons is also achievable if the weather is favorable. "I can say I have grown wheat in Russia," he said proudly. "By using local seeds, putting in fertilizers and chemicals, we demonstrated that we were able to double the harvest."

Tereshkin said that after their encounter with Hinchley and Western technology, local farmers would be more than willing to work for a British farmer. "It is such a pleasure to work when you can see good results," he said. "People in Zalesnoye are almost signing up on the waiting list to work with the Brits."

Why the Britons Are Interested

Over a year ago, Heartland Farms registered its Russian entity and kicked off the project, publishing articles in British agriculture magazines and organizing visits to the Penza region by 25 farmers from northern England, Scotland and Northern Ireland who got in touch.

Hinchley said it isn't just any British farmer who could accept the challenge of coming to Russia. "You've got to have the will, the entrepreneurial spirit, the pioneering spirit," he said.

East Yorkshire farmer Richard Wasling, 48, visited Penza at the beginning of May. He said he is considering taking 5,000 hectares of land -- 3,000 hectares more than he has at home -- and growing cereals.

"We are looking into it mainly because of the size of the areas of land that are available and it is a level of land you can afford to farm and make a profit," he said. We are struggling to make a profit farming over here in Great Britain, and also we are laden with a lot of red tape."

Wasling said he has looked at land in Hungary, Poland, the Czech Republic and Romania, but the conditions offered by Heartland Farms and the administration in Penza look best of all.

"There were four of us visiting Russia. If we decide to come over, than we will combine our business over here, which would then operate the business in Russia," he said. "So we would come -- the four of us. This minimizes the risk if anything goes wrong."

Yevgenia Borisova / MT

Farm director Nikolai Mushtakov did a deal with Hinchley.

Green said that as soon as his contract in Scotland expires, he will start growing barley, wheat, sunflower seeds and probably potatoes in Russia.

"Our farm is in the north of Scotland. The soil is not nearly as good as in Russia. Scotland is a very, very small place. It's very difficult to expand in farming here. I like the potential in Russia." Before his trip to Russia, Green said he traveled to Australia and New Zealand to check out opportunities, but they "don't interest me as much as Russia does."

British farmers' interest in Russia and other countries reflects a crisis in Britain's farming industry. In 1999, the National Farmers' Union polled 5,000 farmers across Britain, and three-quarters of those surveyed said they had no confidence in the future of farming, and 66 percent of farmers' children did not intend to take over the family business, a BBC report said.

"Things have been declining since 1996," NFU economist Blair Keenan said in a telephone interview. "The industry is definitely in crisis."

Keenan said the strong British pound has rendered exports unprofitable, assistance from the European Union is insufficient and recent factors, such as a decline in world cereal prices because of competition from Ukrainian and Russian grain exports, have also dealt blows. He said farmers also are burdened by red tape: various layers of British and Europe-wide regulations.

What Russia has to offer, he said, is low costs of land and labor.

Why Penza?

Half of the region's land is black earth, according to last year's national land survey by land quality research institute RosNIIZemProekt. Legend has it that during World War II, German forces took the rich earth back to Germany by the truckload.

The land is good for growing buckwheat, barley, millet and wheat, especially fodder wheat, said Alexander Blinokhvatov, academician with the Russian Academy for Natural Sciences and rector of the Penza-based Agriculture Academy.

Blinokhvatov said the soil contains 10 times more selenium than soil in the Moscow region and most other areas in Russia, and is loaded with a "full range of vitamins."

Konstantin Artyushin, head of the international department in the regional administration in Penza, said Penza has other advantages, including low overhead expenses, proximity to Moscow, low labor and accommodation costs, good transportation connections and the third lowest crime rate in Russia.

"The only risk here is the weather, but 97 percent of Russia is in the zone of risky farming," he added.

Foreign Money and Expertise

In the past decade, agriculture production in the region has dropped by half, Blinokhvatov said. Only about 40 percent of the region's farms are profitable, said Alexander Makarov, head of the department of crops in the Penza region's agriculture committee.

The Penza administration clearly understands that the money and expertise needed to revive the agricultural sector is not going to come from within Russia.

"We want an effective owner to appear here at last," Artyushin said. "It is not revenues generated by leasing land that we most expect from this project. It is jobs for locals now and tax revenues in the future that will support local communities. And we will give the Brits our support."

The head of the Nizhnelomovsky district administration, Vasily Samylkin, said he is glad that Heartland Farms is leasing land from five farms in his district. "Only half of our 86,000 hectares of arable land is in use. It is not right.

"It is hard to say now what we are expecting from the Brits, but what we are sure of is that they will introduce high standards of agriculture, which will stimulate other farms to follow their example."

The region, which has a population of 50,000, has nine large farms and 78 small households as agricultural producers. Samylkin said the biggest farm, Vozrozhdeniye, made a profit of 18 million rubles ($575,000) in 2001, while smaller farms earned 8 million rubles or less.

"The situation with the machinery is just pathetic," said Ivan Khodzinsky, chief agronomist of the Nizhnelomovsky district. "It hasn't been renewed in the past decade, it is 100 percent worn out. Out of what used to be 10,000 machines, 6,000 are left, but they just work for a week and then need fixing."

Even farms without enough spare land to participate in the new project have tried to establish connections with Heartland Farms.

When Hinchley first met Nikolai Mushtakov -- director of a farm named after revolutionary Valerian Kuibyshev -- at the end of May, they immediately did a deal.

Yevgenia Borisova / MT

Penza farmer Vladimir Uzyukin welcomes the British.

"We give you seeds, you sow, we harvest and then divide the crops 50-50," Hinchley offered.

Mushtakov then asked about the power of the harvesters offered by the British, and his jaw dropped on hearing "100 hectares a day." Local harvesters could do only 35 hectares and also are known to lose about 20 percent of a crop. Quick harvesting also reduces the danger the crop will be damaged by rain.

Mushtakov shook hands with Hinchley.

Heartland Farms is willing to work with all local farmers, Hinchley said. "It's not a case of drawing a line, saying this is one system and this is another. It's very much an integration of societies and ideas," he said. "If we could support other farmers with seeds, machinery, we would do it, too."

Blinokhvatov, the Penza academician, said he was impressed with the British company's approach. "What I really appreciate is that they don't start with a view to getting rich overnight. They are really smart and they don't start with the issues that would bring them an immediate lucrative result.

"The Brits start from scratch -- from the production of raw materials -- and this is very wise. What we need at this stage is a real tangible example to follow."

Protesters and Supporters

The Penza branch of the Communist Party said it will protest the British project, but local officials said they are not worried that the Communists will succeed in spoiling it.

"I spoke to a few local communists -- they are over 70, but they are very hardline," said Samylkin, the district administration head. "They were worried that all the crops would be exported to England. I told them that no, on the contrary, we will soon have a problem selling them and it will be good if we could eventually export.

"Well, they understand it with their heads, but their hearts protest and we can't do anything about it. But of course there is nothing to worry about -- they are not going to do any damage to the Brits."

Boris Zubkov, first secretary of the regional branch of the Communist Party, predicted the foreign farmers would do nothing to help the local communities and said any taxes they paid "would be stolen."

"Look, the state has not built a single school or kindergarten in the past 10 years; it abandoned social needs altogether. The farmers who took over a lot of the land also have not cared about this," Zubkov said. "These newcomers will also skip this fundamental issue -- they will just technically exploit the land, while the people, 535,000 rural residents, will be left with nothing.

"Of course we are going to organize protest actions against these foreigners," Zubkov said.

But Vladimir Bashmachnikov, head of the All-Russia Farmers Union, or AKKOR, said that although he had not heard about this project, his association would support it.

"Communist actions?" he said. "Well, I am sure our local members will be able to think of something equal to show their support. Let these farmers come, let them work, there is enough land for everyone. Let them not listen to the Communists, because there is no logic in their words."

Bashmachnikov, however, advised the British to take the situation in the impoverished villages into account.

"You can't be rich alone in the village," he said. "That's the way to disaster. They must not be hostile, they must be friendly. Those of our farmers who can afford it make donations to local schools, providing kids with lunches, or give some produce to local hospitals."

His Penza colleague Mikhail Petrov said providing jobs to local residents might not be enough to win their support. He suggested the British establish good connections with the local members of AKKOR, who have a lot of influence with the rural population.

"A positive attitude by the locals is the key to success here," Petrov said.

Local officials said what is likely to unite local residents and the British is pure commercial interest.

Farm director Mushtakov agreed. "If these people will work honestly here for 49 years, people will pray for them. There will be some envy of course, but I am sure there will be no fires or pogroms. I hope they will teach other farmers to farm properly, and their success will also give us an incentive to demand changes from the government that will allow us to operate in equal economic conditions."

The Project's Prospects

Yevgenia Borisova / MT

Half of the 2.4 million hectares of arable land in the Penza region has been classified as black earth.

The project should develop step by step, Hinchley said. If all goes well, livestock and potato farming is also possible as well as further development of infrastructure, including the purchase of a grain warehouse, he said.

Hinchley said if 80 British farms appear in the region within the next five years, it should give jobs to at least 1,600 local residents and boost his current staff of four -- who will act as a support team for the farmers -- to at least 50 people, most of whom will be local. Blinokhvatov's academy is already teaching English to a group of its graduates so that they could work as professional agronomists and managers at the farms in the future.

No one except the Communists has voiced any opposition to the British. Even people met by chance in Penza's vast abandoned fields said that they would like to work with the British farmers.

"There are about 200 hectares around here that have been completely wasted in the last five years, and there will be even more because there is no use in working when you are not being paid," said Vladimir Uryukin, 43, once chief engineer of the Komsomolets farm in the Nizhnelomovsky district and now unemployed.

Uryukin's uncle Alexander, 68, pointed sadly out toward the fields and said, "Of course our souls ache for this land. We have heard about the project from our administration head and we would like the English to come here and work."

Vladimir Uryukin said, "What we need is work and payment for it. And it is good that they take land in lease. Before talking about buying our land, they must show that they are worthy as professionals."

Artyushin of the regional administration said the project has the potential to help revive Russian agriculture. "If the project is successful, it will be clear proof that it is possible to work in Russian agriculture," he said. "And I can't imagine any regional administration that would not like to follow up on this practice."