February 28, 2012

Black Earth Farming launches revamp after losses

Black Earth Farming announced that it had "totally revamped" its farm management after having revenue losses of US$30 million due to poor weather, bad decision-making and Russia's creaky logistics, according to Agrimoney.com.

The Russian farm operator expanded its losses by 14.6% to US$41.7 million last year, despite revenues of US$399.5 million, a 14.9% rise from 2010, when the drought hurt producers countrywide.

According to Richard Warbuton, the Black Earth chief executive, the extent of the losses reflected in part of continuation into the end of the year of problems identified last year, with a dry spring cutting yields and rains from July hampering harvesting and cutting crop quality.

When the rain came the unharvested crops sprouted in the ears thus losing milling and malting quality, and meaning only 40% of wheat is class 3 milling wheat in 2011, versus 60% in 2010, he said.

Quality problems had been compounded by the failure of rail wagons to arrive as ordered, and delays in a silo upgrade programme, forcing the group to store crop outside, in wet conditions.

The proportion of wheat fit only for feed reached 20%, and for barley 35%, prompting price discounts of US$20-25 a tonne.

The rail hold-ups also hurt Black Earth's ability to tap export markets, resulting in foregone sales of 130,000 tonnes of rapeseed and wheat, at a margin of US$25 a tonne.

However, Warburton acknowledged that not all the company's result, its fifth successive year of losses, could be put down to uncontrollable setbacks.