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Shipbuilder ploughs into farming business

Shipbuilder ploughs into farming business

Ulsan: Hyundai Heavy Industries plans to grow crops at Sovetskaya farm, in southern Russia. With crop prices surging globally, Hyundai Heavy Industries, the world's biggest shipyard, is entering a very different business from its existing interests - agriculture. Hyundai recently said it will operate a farm in the Sovetskaya farm where regular sunlight, low humidity and rich soil provide a perfect environment for crops. The company has set its sights on using the farm, which is located near the port town of Yeysk in Krasnodar, southern Russia.The plan is to use the farmland to help Korea to be prepared for food crises, claim Hyundai officials. Because Korea imports the majority of its crops including wheat, if food prices soar, Korean food prices will rise. Hyundai is establishing a joint venture with an agricultural affiliate of Russia's state-run natural gas extractor, Gazprom, to run the large-scale farm.
'We have agreed to launch a joint venture in this region,' said a high-ranking official of Hyundai who did not want to be named. Under the plan, Hyundai will operate 157,000 hectares (387,946 acres) of farmland in Yeysk and other farms in the city of Astrakhan, also in southern Russia. The size of the farms is similar to the size of Jeju Island, the largest island in Korea, which lies off the southern coast of the peninsula. Hyundai said it will invest 49 percent in the venture while its Russian counterpart will invest 51 percent. The plan is to sign the contract this month and establish a joint venture by the end of this year. Hyundai said it will first provide agricultural goods to Russia, but if the world's crop prices show signs of soaring, it will provide crops to Korea as well. The Krasnodar region is well known for its rich black soil, which is packed full of minerals.The crops grow without overuse of chemical fertilizers, according to Hyundai.The region is often referred to as the world's breadbasket. The Sovetskaya farm was called sophos, which means a large-scale state-run farm, before the Soviet Union collapsed. After the Soviet Union came to an end, an agricultural affiliate of Gazprom rented the farm. Some of the farm, which is 13,700 hectares (33,852 acres), is being used by individual farmers. A total of 500 farmers produce more than 45,000 tons of agricultural products every year using 100 tractors. The average production of wheat and barley is 6.1 tons per hectare per year. This is equivalent to the whole production of wheat and barely in the Ukraine. However, most of the machinery at Sovetskaya hasn't been updated for at least 20 years. The state of the aging facilities has a definite impact on productivity. However, there are concerns among farmers in the region about the role of Gazprom in the deal. 'Gazprom has downsized its affiliates to focus on its specialty such as production and transportation of oil and gas,' said Boris Ivankin, an advisor of agricultural department of Gazprom. 'That's why foreign investment is desperately needed here,' he added.
Cash rich HHI is expanding away from its traditional construction background to invest in trading ships and even start up airlines.  [17/9/08]


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