PhosAgro chief bullish on Russian agricultural sector
Russia’s booming agriculture sector and rising exports to China because of its trade war with the US is helping the country’s local fertiliser producers grow at unprecedented levels, according to the chief executive of PhosAgro.Andrey Guryev, chief executive of the fertiliser producer, said: “Everything we are seeing from the geopolitics standpoint — the US-China trade war that will not end but will continue, and get worse — Russian agriculture is the 100 per cent beneficiary of.”Already a major grain exporter, Russia has begun to sell chicken and is preparing to start pork exports to its largest agricultural products market, China, which imposed tariffs on US meat in the summer as part of the trade spat between the world’s leading economies. While agriculture contributes less than 4 per cent to the country’s gross domestic product, its profitability has been soaring. “It is a cash-machine . . . We see this, the state sees, the whole business sees the unique moment today. So I am sure investments into this economy will continue expanding,” Mr Guryev said. Russia, which was close to being a net food importer only a few years ago, boosted its agriculture sector with the introduction of counter-sanctions banning imports of certain food products from Europe and the US in response to their sanctions in 2014. Further support came from a state subsidy on loans, relatively low production costs, and the weaker rouble helping exporters’ profits. However, Elena Sakhnova, analyst at VTB Capital, cautioned against the agriculture and fertiliser industry counting on the trade war for long.“Yes, the trade war will be one of the factors that will help increase agricultural output and fertiliser production. But it shouldn’t be overestimated,” she said. “It is not a significant factor for us at the moment. Perhaps, the effect will be accumulated in the future.” What was helping more were the 2014 state subsidies and record fertiliser demand last year, with expected 4-5 per cent annual growth over the next five years, she added. PhosAgro, which holds a third of the domestic market share, expects to boost domestic sales by 17 per cent on the year to 3.5m tonnes in 2020. It plans to invest $3bn over the next five years to build additional production capacity and raise total output by a quarter to nearly 12m tonnes by 2025. Russian fertilisers are also naturally low in cadmium and have gained some advantage after the EU decided to cut cadmium levels in fertilisers this year. The UN Food and Agriculture Organization followed with a recommendation to limit heavy metal content in fertilisers worldwide last month. As a result, PhosAgro expects to raise its share in the European market of phosphate fertilisers to 25 per cent from the current 15-18 per cent, selling 3.1m tonnes in 2025, compared with 2.7m tonnes that is expected to be sold this year. “Undoubtedly, some increase [in PhosAgro sales] will come from some producers voluntarily switching to cleaner Russian fertilisers as a marketing step. But I don’t think PhosAgro will be able to grow its share only through this factor,” added Ms Sakhnova.