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Greenhouse industry in Russia: opportunities for efficiency


Financial corporation JSC "Sistema" acquires JSC Agrocombinat "Yuzhny" - one the largest eruopean greenhouse complexes. Investments in russian greenhouse industry are expected to rise while Ministry of Agriculture takes expansionary measures.

"Yuzhny" greenhouse complex harvests nearly 40 000 tons of tomatoes and cucumbers annualy. These are marketed through Auchan, Metro Cash & Carry, X5 Retail and other russian mass retailers. The revenue of "Yuzhny" was equal to 1,95 billion roubles in 2014 (nearly 54-58 mil. USD in terms of 2014 rouble/USD exchange rate). The cost of acuiqsion for 144 ha of land, communications and personel is estimated 40-80 mil. USD.

JSC "Sistema" is famous for its investment in Oil&Gas, insurance and telecommunications sectors, so what moved the corporation to invest in greenhouse business?

Long years of high hydrocarbon prices coupled with strong rouble made it more benefical for Russia to import vegetables from efficiently cropping countries than to invest in modern greenhouse technologies. This led to technological backwardness and dependence of country on imported tomatoes - according to UN comtrade in 2014 Russia had imported 847 thousand tonnes of tomatoes, 365 of which had been supplied from Turkey.

The low competitiveness of russian greenhouse industry is best illustrated with yield figures. The tomatoes yiled of "Yuzhny" varies in a range of 260-280 tonnes per ha annualy, which is almost twice less than the yield shown by belgian growers.

The weakening of rouble changes a wide range of conditions vitally important for investments in greenhouse industry:

1. Rise of tomatoes prices. By jan-march 2015 tomatoes prices in Russia doubled in comparison with the same period of  2013. In the first quarter of 2015 tomatoes prices have reached 130-144 roubles/kg (2,2-2,4 USD/kg).

 Source: Rosstat

2. Due to rouble weakening the average price of electricity supply fell from 70-75 USD per MWh in 2013 to 40-45 USD per MWh in 2015, the average price of natural gas supply fell from 170-180 USD per thousand m3 to 85-90 USD per thousand m3. In addition, the Ministry of Agriculture of Russian Federation has initiated a proposal to cut tarrifs for electrical power supplied to greenhouse complexes;

3. The average salary in agricultural sector fell from 490-510 USD per month in 2013 to 280-290 in 2015; 

All the abovementioned factors form a substantial background to increase the competitiveness of russian greenhouse industry on a global scope. Investments in greenhouse sector will also be supported on a state level, - starting from 2016 the Ministry of Agriculture of Russian Federation is planning to return 25% of capital expeditures for greenhouse construction.

Consequently, state support and low rouble exchange rate will stimulate investors to put money in greenhouses construction. For example, in december 2015 Rusagro holding has announced the plan to build 300 ha greenhouse complex, Arkadiy Abramovich (the son of a billionaire Victor Abramovich) might build up to 200 ha of greenhouses in Rostov area, state-owned sovkhoz "Vostok" plans to construct 120 ha complex in Sochi area. Nevertheless, this industry is far from saturation - the Ministry of Agriculture of Russian Federation estimates that 1500 ha of greenhouses must be built till 2020 to satisfy the country's needs.

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