Agri-industrial complex of Krasnodar region:

successful experience in supporting investors

Evgeny GromykoVice-Governor

Krasnodar region

1. Main aspects of development of agri-industrial complex in Krasnodar regionCharacteristics of the region;Structure of agricultural land;Main economic indicators;Labor efficiency.

Krasnodar region– the largest agri-industrial region of Russia

The southernmost region of Russia;

Region with the most favorable weather conditions for agriculture in Russia;

3,8 mln. ha of plough land , 70% of which is black soil (rus. - chernozem);

The opportunity to grow more than 100 agronomic crops;

More than 342 000 ha of pasture land for farm animals;

45% borders, going on the sea, and 9 non-freezing sea ports provide all year round external trade.

3 753.2 54.4

 28.2  51.5  342.3

Structure of agricultural land of Krasnodar region

Total area of agricultural land of the region exceeds 4,2 mln. ha;

More than 88% is plough land, 10% of which is irrigated;

gardens

vineyards hay-fields pasture land

plough land

In Thousand

Ha

Main economic results of agricultural enterprises’ activity in the region

Gross revenue exceeds $3,5 billion per year;

Volume of net profit for the last 4 years has grown up on 26%;

Agri-industrial complex of the region has overcome the consequences of the crisis of 2009 year. In 2011 profitability will amount to more than 20%

Profitability,%2007 year 2008 year 2009 year 2010 year 9 month

2011 year

 0.0

 0.5

 1.0

 1.5

 2.0

 2.5

 3.0

 3.5

 4.0

 2.3 2.7  2.8

 3.5

 2.6

 0.4  0.4  0.3 0.5  0.4

Income, bln $ Net profit, bln $

2007 year 2008 year 2009 year 2010 year 9 month of 2011 year

0.0

5.0

10.0

15.0

20.0

25.0

21.118.7

12.9

17.820.2

Labor efficiency in agri-industrial complex of Krasnodar region

Labor efficiency in agricultural sector of Krasnodar region exceeds average Russian indicators 4 times.

Krasnodar region takes the 17th place in Europe for labor productivity in agricultural sector (Russia – 26 place).

Labor efficiency in agricultural sector, thousand $/1 worker

Russia

Krasn

odar region

Europe (i

n average)

 0.0

 10.0

 20.0

 30.0

 40.0

 50.0

 8.0

 28.0

 48.4

2. Sector structure of agri-industrial complex of Krasnodar regionHorticulture; Livestock breeding;Food and processing industry; Technical support of the sector.

2.1 Horticulture

Horticulture sector of the region on a national scale;Structure of cultivated areas;Volume and structure of horticulture products.

Horticulture sector of Krasnodar region on a national scale

100% tea and subtropical cultures ;

78% rice;

55% grape;

45% corn;

32% sugar beet;

18% sunflower;

16% grain.

Structure of cultivated areas, mln. ha

Total crop areas in Krasnodar region amount to more than 3,6 mln. ha;

40% - fall planting; 60% - spring planting.

1.5

0.50.470.20.1

6

0.14

0.8

0.47

Fall-planted (wheat and bar-ley)CornSunflowerSugar beetSoyaRiceVegetables and gourdsOther spring-planted

Volume of production and structure of horticulture products

61% of production of agri-industrial complex of the region;

More than 15 mln. tonnes of products (without sugar beet);

51,5 billion roubles Gross Regional Product;

Cere-als and

grain legumes47%

Corn for grain8%

Sunflower

seed

8%

Soya

3%

Vegetable

crop

2%

Sugar

beetroot (factory)14%

Other products

18%

2.2 Livestock breedingTotal number and structure of livestock complex;

Structure of cattle stock;

Volume of production and structure of products of livestock sector.

Structure of total number of animals

259 000 headsIn 1990 – 588 000 heads

1 mln. headsIn 1990 – 2,9 mln. heads

152 000 headsIn 1990 – 954 000 heads

22 mln. headsIn 1990 – 32 mln. heads

Structure of cattle stock, %

Number of head of cattle stock exceeds 259 000 heads;

Main share– dairy breeding;

More than 32 000 heads – imported;

4 865 heads of pedigree bred heifers of dairy breed were imported from the USA for the last 4 years

37.5

7.830.2

0.1

24.4

cows bred heifers heifers stud bulls young stock

Volume and structure of products of livestock sector

Cattle stock50%

Pig breeding17%

Poultry28%

Other5%

31% of products of agri-industrial complex;

More than 32,7 billion roubles Gross Regional Product;

More than 1,2 mln. tonnes of products.

2.3 Food and processing industry

Share of the sector on a national scale;

Main indicators of the sector.

Share of the sector on a national scale

Canned food on meat basis for babies – 85%

Rice cereal– 78%

Natural coffee- 61%

Sugar from sugar beet– 35%

Vegetable oil– 22%

Fruit and vegetable juice– 11,5%

Main indicators of the sector

Total volume of investment into the sector for the last 4 years – 1,25 bln. USD;

The volume of the shipped products has increased from 3 bln. USD to 5,4 bln. USD since 2007;

Large enterprises in the region:

- 14 meat processing factories

- 20 milk processing factories

- 16 sugar plants

2.4 Technical support of the sectorQuantity and structure of agricultural machinery;

Main countries – exporters of agricultural machinery to Krasnodar region;

Main companies-exporters from the USA.

Structure of agricultural machinery of Krasnodar region

In the beginning of 2011 there were more than 35 000

units of agricultural machinery in the

organizations of the region

Structure of agricultural machinery

Share of machinery of import manufacture

About 2,2 thousand of units - machinery of import

manufacture

82%

15%

2% 2%

tractors grain combine harvestersforage harvesters sugar-beet harvesters

Machinery of Russian

manufacture

94%

Imported machinery

6%

Structure of main exporters of agricultural machinery to Krasnodar region

The USA– leader in export– more than 62%

62%

24%

5% 2%2% 5% the USA

Germany

Italy

Canada

Joint production

Others

Main companies-exporters from the USA

56%

19%

10%9% 4% 2%

Agricultural machinery from the USA in Krasnodar region

( )Другой текст см русскую

3. Investment into agri-industrial complex

Sources of financing of agri-industrial complex;

Main risks for investors;

Risk minimization in agri-undustrial complex.

Main sources of financing of agri-industrial complex

Agri-industrial complex

Bank loans Subsid

ies

Tax c

oncessi

ons

Own resources Outward investment

Providing of food supply securityDecrease in share of import on the market

Quality products at available prices

Leasing

Объём накопленных инвестиций в АПК , . .Краснодарского края млрд долл

2007 year 2008 year 2009 year 2010 year 9 month of 2011 year

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0.8

0.90.8

1.01.1

Main risks for investors into agri-industrial complex•Change of market prices for the products;

•Increase of prime cost in connection with a rise in energy resources cost;

•Change of interest rates in financial institutions.

• Decrease (loss) or increase (excess

production) of harvest in

connection with natural anomaly

•Undeveloped social infrastructure of a

village;

•Low level of awareness of workers

in agri-industrial complex about

advanced technologies of management

•Weak logistics in agricultural sector

•Change of tax legislation;

•Change of conditions and volumes of state support;

•Drawbacks of integration into the global economy (including entrance of the Russian Federation into the WTO)

Macroeconomic Climatic

SocialPolitical

Risk minimization in agri-industrial complex

Effective agricultural

sector

Close cooperation with the regional

authorities(ответств )енность властей

Usage of insurance instruments and

participation in the programs of state

support

Usage of advanced high-efficiency technologies of management

Development of informative-consulting

services in agri-industrial complex of the region and

service «one window»An application of modern

technologies and observation of scientifically proven time periods of planting and crop

rotation, diversification of cultures

4. State support of agri-industrial complex

Sources of state support of agri-industrial complex;

Main types and directions of providing state support;

Volume of financing activity-specific.

Sources of financing of state support measures in agri-industrial complex of Krasnodar region

Resources of the Feder

al Budg

et

Resources of the Regio

nal Budg

et

Resources for providing state suppor

t in agri-

indutrial

complex

State programme «Development of agri-industrial complex» till 2020 year;

Regional programme «Development of agricultural markets of raw material and food» till 2020 year;

Regional economically significant programmes;

Departmental regional programmes.

Main directions of state support and distribution of resources, %

60%

24%

16%

• Compensation of a part of interest rates for short-termed loans;

• Compensation of a part of expenditures on interest payment for investment loans;

• Compensation of a part of expenditures on interest payment for the loans on development of small businesses

• Compensations for a purchase of mineral fertilizers and chemical products;

• Subsidies for fuel for agricultural works;

• Subsidies for the support of livestock ;

• Subsidies for a purchase of elite seeds.

• Federal target programme «Social development of a rural area»;

• Regional target programme «Development of dairy cattle»;

• Regional target programme «Development of meat cattle».

Support during investment and loan

Support of ongoing activities

Support within the frames of target programmes

Volume of state support in the field of investment and loan granting, 2005-2011 years, mln. $

 0.0

 20.0

 40.0

 60.0

 80.0

 100.0

 120.0

 140.0

 160.0

 180.0

 200.0

 23.8

 149.2

 197.1

 1.2 15.1

 39.4

Resources of the Federal Budget Resources of the Regional Budget

Volume of state support of agri-industrial complex in the field of ongoing activities, 2005-2011 years, mln. $

 0.0

 10.0

 20.0

 30.0

 40.0

 50.0

 60.0

 10.7

 21.0  22.1

 36.3

 50.3

 1.2  2.1

 8.0

 0.3

 15.5

Resources of the Federal Budget Resources of the Regional Budget

Volume of state support on target programmes, 2005-2011 years, mln.$

 0.0

 5.0

 10.0

 15.0

 20.0

 25.0

 30.0

 35.0

 40.0

 45.0

 19.2

 44.9

 7.6

 17.2

Resources of the Federal Budget Resources of the Regional Budget

5. Cooperation of Krasnodar region and the USA

Main ways of cooperation of Krasnodar region and the USA;

Future-oriented ways of cooperation

Main ways of cooperation of Krasnodar region and the USA

Purchase of agricultural machinery and equipment;

Purchase of pedigree cattle stock and poultry;

Purchase of components for feed manufacturing;

Organization of processing and other types of manufactures.

Future-oriented ways of cooperation today

?

Future-oriented ways of cooperation tomorrow

1. Using of financial institutions and instruments of the USA;

2. Creation of joint manufactures in agriculture sector, food and processing industries;

3. Increase in the volumes of purchase of pedigree animals and poultry;

4. Implementation of American experience and technologies in irrigation sector;

5. Technical support in certification and standartization of products and manufactures, energy-saving technologies and equipment.

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An investor for the construction of a sugar plant is demanded

Productivity of the plant – 16,6 thousand tonnes/24-hour period;

Volume of investment– 300 mln. USD;

Payback period– 4,5 years;

The area of a land plot– 97,7 ha;

Direct investment.

Thank you for your attention!Welcome to Krasnodar region!