|Yesterday Shan, Nancy, and I went on a road trip to the village of Rojestvo near the city of Vladimir where there is a brand spanking new 2000 head dairy farm under the management of an American couple, the Grams. The couple has only been here six months, have no Russian language training, and have two very small children. What with the culture shock and the strain of starting a new operation in Russia they were understandably very stressed out last time that Shan and Nancy had visited them a few months ago. However, they seem to have worked through the worst of it and now seem to be doing very well.
The dairy was started by an English zillionaire that originally comes from Poland. Basically this massive dairy farm is his hobby farm. He lets the American couple manage it and likes to come play farmer once in a while. Which is actually really great for the dairy because they have lots and lots of new and very expensive toys to play with as you'll see in the pictures. I asked Mr. Grams, the American manager, why the guy chose a dairy farm in Russia. Mr. Grams told me that some zillionaires buy big yachts or go on safaris. This guy builds farms because it keeps him busy and is a challenge.
How do you make a small fortune in farming?
Start with a large one...
There are a lot of new western-style dairies going up in Russia. There is a lot of opportunity here for agriculture and people are building fast. However the opportunities are matched only by the challenges. For a company to get enough land to build the dairy and grow their feed ingredients they usually have to go through the local provincial government who will give them ex-collective land almost for free. But before we can go further it is time for a lesson in economics
Most of the farm land here was put into the hands of the newly privatized collective farms following the fall of the Wall. The employees were given "shares" of their new companies and basically told "Okay, now you are a company...and on your own." Suddenly these massively inefficient farming operations were thrown into the cutthroat arena of high capital, western-style farming. And promptly sank. In the rare event that there was a manager with any real knowledge of farming for profit he or she couldn't just lay off the hundreds of unnecessary employees as they were the shareholders. Nor could they gain access to capital as no western bank in their right mind is going to make a loan to an ex-collective farm, and you might as well try to break into Fort Knox than try and get a Russian loan. The only factor of production they had going for them was land, and they had plenty of it. Still do. But one out of four factors of production isn't going to cut the mustard and so Russia now has bankrupt collectives all over the place. Enter the westerners.
The local governments are willing to "give" the land to the dairies in exchange for one thing: the ex-collective, and all it's employees, must be taken over by the dairy. A Trojan horse if there ever was one, but it's the only way. So these dairies bring in their western managers who are promptly faced not only with the prospect of starting a business in a foreign land, but also integrating these bas-ackwards collectives and their various employees and accounting systems, or lack thereof. The upside is the dairies get thousands of acres of good land to work with. The downside is they have to work with the collectives. However, if the managers are persistent enough they can usually get things up to some kind of order. Shan and Nancy have been slogging it out here for two years with their collective friends and are finally starting to see some daylight. The Grams have the great pleasure of working with not one, but TWO collectives. Good luck Mr. and Mrs. Gram.