Season-2011/12 for the fat-and-oil industry of Russia can be considered as the benchmark - holding “Sunny Foods Holding Company»

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APK-Inform

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Last 2011/12 season the Russian market of sun seeds set the new records: sun seeds production record volumes and the high volumes of sun oil and meal production; the record exports of sun seeds and by-products in the last few seasons. Another feature moment of 2011/12 MY was the ratification of the agreement about Russia entering the WTO.
To share the features of the work of the fat and oil complex of Russia and also to estimate the past season agreed the representatives of the holding “Sunny Foods Holding Company” - the director of the oil stock division Vyacheslav Kitaychik and the director on the Corporate affairs and Public relations – Valisiy Bortmanin.

- In July the Holding “Sunny Foods Holding Company” selebreated the 8th anniversary. Tell about the success the holding reached in the stated period?
Vasiliy Bormatin (V.B.): Yes, 8 years in the large-scale business is the  mature age. We have done a lot. To date our holding is one of the industry leaders, it is the modern fully equipped production, professional team, demanded commodities and confirmed quality of the world level. As you understand we try to move on. We have got a lot of plans by the developing and widening of the production. In the holding active there are fat factories – Moscow, Saratov and Novosibirsk, oil-extracting plants - Atkarsk and Armavir, and also the net of 8 elevators in the Volga region and Krasnodar Krai with the simultaneous capacities level of 760 thsd tonnes.

- On your opinion what was 2011/12 season like for the Russian fat-and-oil industry?
Vyacheslav Kitaychik (V.K.): 2011/12 season was unique for the Russian  fat-and-oil industry. First in the long time the market was balanced so despite the record crop the agricultural producers were able to sell it without falling of the purchasing prices. Two years ago the stated result would cause the price fall to 5-6 thsd RUB/t. But in 2011/12 MY the processors were able to accept all measures in order not to crash the market down and hold the increased processing volumes. As a result the domestic market needs in the liquid vegetable oils were satisfied and the essential volumes of the end products were exported at the attractive prices. I would note the stated season as the model! All the market participants – from the field to the end producer were able to work with the profit. Of course it was hard but the result is excellent.

- It is obvious that except of the optimistic moments (sunflower record high crop) the market also faced the optimistic moments – qualitative parameters of the harvest. What is your estimation of the raw-material quality in 2011/12 season?
V.K.: First, let’s clear the point. Record high is what? Five years ago the stated rate would be at the level of 7-8 mln tonnes. Barely who believed Russia is able to harvest of 9 mln tonnes. But in the reported season Russia harvested over of 10 mln tonnes of sunflower and all the oilseeds (including soybean and rapeseed) we harvested of over 13 mln tonnes. The quality was problem. The autumn was rainy so we harvested sunflower with the high level of the moisture. A lot of regions faced the unreadiness of elevators and plants for the acceptance of the large-scale volumes of sunflower with the high moisture rates. But in our holding we tried to solve all the appearing problems and organize the receiving. So we not only harvested but also saved crop. But this is unique issue for our country.

- What difficulties unlike of the seeds quality lack (high moisture) the Russian oilseed companies faced in 2011/12 MY?
V.B.: Large-scale crop and production large-scale volumes mean serious problems with logistics considering the grains crop also faced high level. Preparing the raw-material the problems are faced in the lack of the specialized motor-transport, the wight control on the roads taking off a lot of time. The shipping of the end commodities also faces the range of logistics
problems. In the past two season there is the sharp issue of the moving-stock.
Then was the cold winter. In the beginning of 2012 the major ports of Azov and the Black Sea were frozen, the exports were mostly paralyzed. The processing plants were ready to stop due to the impossibility to ship the end commodities. But we handled it also.

- And still what is the reason of the logistics problems which are inherent for the range of the companies work? What else difficulties do the Russian export oriented companies-producers of the fat-and-oil industry face?
V.K.: During the years we have been working in the planned economics while the state was responsible for provision with the necessary for the stock or commodities transportation. To date it is necessary to input the essential funds into the creation of the new modern logistics infrastructure . Some problems can be solved only under the government support. But in general we still work following the rest from the planned economics rules. The Russian railway with the numerous affiliated enterprises do not wish to change or if they do – then very slowly. Actual differentiation of the Russian railway caused the tariffs increase meanwhile the services quality is still at the same level, the terms increased the responsibility lowered.

- High crop of 2011/12 season allowed to Russia to increase sunflower oil exports to 1.4 mln tonnes. Did it impact on the redistribution of the sunflower oil positions on the domestic and foreign markets?
V.K.: The major buyers are still the same but the shipping volumes increased. Thus Turkey purchased 510 thsd tonnes of sunflower oil in bulk weight while keeping the first line in the buyers list. The bottled oil was mostly exported to the CIS countries, and almost half of them was purchased by Uzbekistan. Of course there are new buyers like China. But the supplies are still insignificant. The exports level of 1.4 mln tonnes is the record for Russia but the domestic industry has been preparing to the stated rate during the long time. Note owing the increased production of the sunflower oil we not only exported the large-scale volumes but also decreased the import vegetable oils demand, the tropic one first of all (- 150 thsd tonnes compared to 2011 level or over of 20%). All the Russian enterprises can be divided by two groups. First is holdings processing nearly 65% of the crop, second one is middle- and small-scale plants with the share of 35% respectively. Lat year owing the availability of the raw-material large-scale volumes the shares changed and totaled 60% and 40% respectively. But the exports essentially increased. The shares of the major participants saved the average rates from the previous seasons. Thus, “Sunny Foods Holding Company” shipped nearly 110 thsd tonnes of the oil in bulk and packed but the share in all the exports stayed the same.

- Would you tell how reasonable is the introduction of any limitations, taxes for exports/ imports depending on the high or low crop of the oil seeds?
V.K.: Russian oilseeds and by-products  market is high competitive. So any changes of the ratio of supply and demand it is able to regulate by itself. The export barriers are necessary in order to defend the domestic market. The government should introduce any measures if there is the crop serious lack of the essential production increase. However considering the past year experience 10 mln tonnes of sunflower for our industry is OK. The additional measures are necessary if the sunflower crop decreases to 5-6 mln tonnes the minimum consumption level of sun oil. But it is difficult to define the maximum. Our industry is able to process nearly 12-13 mln tonnes of sunflower, and considering the other oilseeds the capacities level is good for 16 mln tonnes. But note the new capacities to become into operation in the nearest 3-4 years. This means if there is the new record crop we should stimulate the exports of the end commodities. Then the same as in 2011/12 MY we shall be able to process the record crop and realize the deep processing commodities at the profitable price and guarantee the good prices for the agricultural producers.

- One of the most important moments of 2011/12 MY is the joining of the Russian Federation to the World Trade Organization and as a circumstance the oilseeds export taxes decrease, including the sunflower. What circumstances will the Russian oilseeds and by-products market face?
V.B.: Russia was prepared for the entering of the WTO. The Government developed and still developing the range of the measures in order to defend the domestic market and the fat-and-oil complex also from the negative circumstances of the entering. So the taxes decrease to be gradual. But the sunflower export tax decrease in four years to 6.5% is too much. In Ukraine as I understand the tax was lowered to 10% and not to be more decreased. Meanwhile there is no VAT for sunflower exports (in Ukraine the VAT rate is 20% meanwhile in Russia – 10%). So the Ukrainian market is better defended than the Russian one. But the major issue in the entering of the WTO is the same game rules unlike of the taxes. The WTO entering to simplify the negotiations with our foreign partners and providing of the supplies. Also it is easier for our commodities to win the foreign markets with the high
added tax.


- Holding “Sunny Foods Holding Company” is one of the few on the fat-and-oil market processing the high-olein content sunflower and the oil production. What are the advantages of the product? Is there any prospect in it?
V.B. Yes, it is one of our priority directions. High-olein content sunflower has already won its place on the world market. In the USA the share of it totals nearly 100%, in France – 60%, in Russia – just 2%. The market to face the active developing in the close future. It is interesting for fat-and-oil production by the possibility of replacing of import tropic oil – indispensable ingredient of the a lot of fat-and-oil products. Such a small share is based on the technological features of the production, harvesting, storing, processing. In our country there are a lot of small-scale farming enterprises not able to provide the necessary sanitary norms (the field should be in  at least 300 m from any field with the traditional sunflower in order to escape cross pollination). Also the necessary are the independent transportation, drying, oilseed cleaning and storing. It is necessary to equip the laboratories on the elevators and plants with the new high-cost equipment in order to define the content of the oleic acid. Besides, it is necessary to provide testing of foreign technologies in our fields, zoning of foreign seeds and obtaining of domestic ones resistant hybrids of high-oleic sunflower seed. Holding “Solnechnye produkty” is actively providing the issues: holding the conferences for the agricultural producers, providing them with the seeds, inviting the foreign specialists for the consultations, developing the new lines of the end products in order to provide the guarantee demand on the high-oleic sunflower. Our elevators and plants are already equipped with the necessary equipment. Recently we out in production the bottled high-oleic sunflower oil under the trade mark “Rossiyanka”.
Of course the domestic market has just only started to develop. The product is new. So while the major volumes of high-olein content sunflower oil are for exports. But under the current program supporting the development of the high-oleic sunflower production it will be changed. In 2012 owing the special project the partners – agricultural producers of the holding “Sunny Foods Holding Company” increased the high-oleic sunflower planted areas to 40 thsd ha in the Volga region only (year before the rate totaled nearly 9 thsd ha). Next year we plan the planted areas further increase.

- What will the new 2012/13 season be like?
V.K.: It will doubtfully be the unique for the industry as the previous one was. But the major tendencies to be saved. Considering our estimations the sunflower crop in Russia will exceed 8 mln tonnes. So will decrease the processing volumes and the end commodities production. But the crop stated decrease is not critical – its level is the second for Russia by its volume. It will be particularly compensated by further increase of the other oilseeds production, soybean and rapeseed first of all. The Russian market domestic needs will be fully provided, meanwhile the surplus to be exported. Sunflower exports to decrease to 600-700 thsd tonnes (package and bulk). Despite the speculative increase of the purchasing prices for sunflower on the start of the season they to set back to the objective market level of 15000-16000 RUB/t including delivery to the plant.

- Russia started the sunflower harvesting campaign of 2012/13 crop. What is the quality of the offered stock?
V.K.: The temps of the harvesting are rather high, besides the farmers started the harvesting campaign by 2 weeks earlier, so they will finish it earlier too. The sunflower quality is good. Note the decrease of the average oil content (compared to the last year rate) so the oil production to reach the lower level. Note despite the early harvesting the Russian agricultural producers hold the sunflower sales awaiting for the prices essential increase. Due to the dry weather they cannot deliver sunflower on the elevators. As of the beginning of October over of 2 mln tonnes were on the stores in the enterprises. More 3 mln tonnes to be harvested. Meanwhile all the companies-processors purchased nearly 1.5 mln tonnes and nearly the same volume was on the elevators being stored by traders. So it is difficult to talk about the average quality, and will they be able to provide the quality safe.

- Share the plans of the holding “Solnechnye produkty” for the future
V.B.: To date our most significant project is the building of the new oil-extracting plant in Balakovo. Project is already in operation. By the end of the next year we will be able to report about the putting into operation of the new production with the total capacity of 1800 tonnes of the oilseeds per day. The new plant by its engineering and technical progress. Balakov oil-extracting plant can receive the raw-material and ship the end commodities by all means of transport – motor, railway, river. We have the long-term program in cooperation with the agricultural producers of the region so there is no problems with the provision of the new plant with the raw-materials. And its suitable location to allow successfully work on the Russian market and for exports as well. We also plan to continue all the started programs including for high-oleic sunflower and for the processing of the other oilseeds.
We plan to move on. We have the clear understanding of what it is necessary to do and how to do that and when. But the main – we have the staff. Success is not the purpose of us but the result of our work.


                             Interviewed by Anna Platonova

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