Black Earth Farming followed the likes of Agrokultura in revealing
a "shrink to victory" strategy as it unveiled a wider first-quarter loss, with
the rouble's plunge hitting the farm operator's plans to return to profit.
The Russian farm operator revealed that it planned to sow
185,000 hectares with crops this year, an area which, while large by Western
standards, represents a cut of 40,000 hectares year on year, an area bigger
than that of Dublin, Honolulu or Taipei.
The decline reflects in part the sale of last month of
27,754 hectares of land, plus facilities for storing 29,000 tonnes of crop, to
Avangard Agro, the Russian agricultural giant which already controlled more
than 300,000 hectares of land, and harvested 1.27m tonnes of crops last year.
Black Earth Farming expects to book a $5m after tax profit
on the $21.1m sale of land from a region the group highlighted has historically
produced below-average results.
Indeed, the group's chief executive, Richard Warbuton, said
that it had decided "not to crop land with lower expected yield potential" in
other parts of its empire too.
'Shrink to victory'
The decision echoes that from peers such as Black Sea peer Agrokultura,
which has also reduced its area to the best-performing areas in an attempt to
boost its fortunes, a plan one City analyst described to Agrimoney.com as a "shrink
to victory" strategy.
However, Mr Warburton, unveiling Black Earth Farming's 1.46bn-rouble
loss last year, highlighted that the group's "yields were too low, the costs
were too high".
He said on Friday that the group was focusing on "continued
operational improvements to lower cost per tonne in our core business".
Rapeseed out, corn in
The biggest cutback in sowings has come in winter wheat, for
area is down some 60% at 30,200 hectares, although that also reflects a poor
sowing period, with persistent rains hampering plantings.
Among spring-sown crops, rapeseed area is being cut by 44%
to 17,700 hectares, with barley and soybean sowings reduced too.
But the group's corn area is expected to soar 52% to 55,800
hectares, echoing the grain's increasing popularity in the region, first in the
Ukraine, which has emerged as a major world exporter, and now Russia - a trend
fuelled by improved seed, some imported from Canada.
Russia's corn harvest will hit a record 12.5m tonnes this
year, thanks to a rise in area to an all-time high of 2.60m hectares, the US Department
of Agriculture forecasts.
Black Earth's comments came as, in its first results
reported primarily in dollars, it unveiled a 41% rise to $19.6m in losses for
the January-to-March period.
Although revenues rose 28% to $25.4m, a 9% weakening in the
rouble against the dollar over the quarter caused an $8.2m loss during the
period in "foreign exchange translation and transaction effects".
Black Earth Farming shares, which are listed in Stockholm, stood
1.7% lower at SEK5.90 in morning deals.