28 June 2002

Long history of involvement

HEARTLAND Farms and its management have a long history of involvement in the Russian market.

During the 1980s, chairman Paul McVay was malt export director for a major multinational, having regular dealings with the then Soviet Union.

Following Peristroika, he helped set up the original Heartland business – Matrix – in 1992, to develop business opportunities in eastern Europe and Russia. The plan was to develop malt sales, but it soon developed into a commodity trading company.

Through these activities and contacts, a joint venture company was set up in 1995 with a Russian agricultural outfit in Voronezh, next to the border with Ukraine, taking Matrix into grain production for the first time.

Specifically, the company set up a harvesting team, importing the first two Claas combines to the region, each working over 1000 hours a season.

A similar operation was then developed in the Penza region. "The benefits of using western equipment were enormous," says agricultural director, Colin Hinchley. "The savings in wheat lost during harvesting alone were enough to cover our costs."

Payment at that time was made as a proportion of the crop, ensuring the company had physical commodities to then convert into hard currency.

The next step, in 1998, was to set up two 2000ha-plus demonstration farms – one in Voronezh and one in Penza – to show to a wider audience what was possible with western techniques. This was the birth of Heartland Farms.

"Using the most basic techniques, for example reduced row spacing of sunflowers to achieve a thicker canopy and suppress weeds, we were able to demonstrate that significant yield increases were possible, despite the limitations of rainfall," says Mr Hinchley. (On average the area gets just 40-50cms of rain a year.)

"We didnt get it right first time," he admits. "Initially we ploughed too deep and the soil fluffed up."

Through the demonstration farms, Heartland Farms developed closer links with the local administration. It was in 2000 that the company was approached by state governor, Vasily Bokcharov, who explained there were almost 400,000ha in the province lying idle and asked if they could help bring it back into production.

"Since then we have been assembling the blocks of land and getting it ready for British investors."

says Mr Hinchley. "Its been a major learning process, with hurdles round every corner. But weve had good help from the locals, employing a number of Russian staff to help us with the negotiations and financial aspects.

"Weve established links with several local and international input and machinery suppliers, and spent time trying to further develop potential markets. Weve learned by our mistakes, so that people coming out here to farm do not make the same ones."