The group rented 300 hectares from small plot owners via Comcereal Bacau in the first half and the goal is to farm 10,000 hectares of land to keep raw material costs under control, which are the biggest costs of the poultry company.
“I’d like us to get to 10,000 hectares but I don’t think it will be possible because the rise in grain prices in recent years has made the market a crowded place,” says Grigore Horoi, Agricola Bacau chairman.
The poultry producer is focusing on signing land leases, a development model that entails payment of annual rent that stands at one tenth of the acquisition value of the arable land. Agricola Bacau pays 700 to 800 kilos of wheat per hectare a year as rent.
Agricola’s direct competitor Transavia has developed aggressively along this line over the last two years, so it is now farming about 10,000 hectares of land in Transylvania.
The Bacau company, however, gets some of its wheat, barley and corn from other farmers, after having built partnerships over the years.
“We are working with 15 important farmers from which we regularly buy,” says Horoi, who runs a group with more than EUR130 million yearly revenue.
The steps towards integrating agricultural production come at a time when the feed market is volatile and the costs of poultry feed make a direct impact on the profit. The volatility on the feed market is much greater than that of shelf prices, which can only be adjusted depending on what other companies on the market do and after negotiations with retailers.
The rise in wheat, corn and soy price ate into the poultry farming profit Agricola had budgeted in 2012 so the net margin was below 1% that year. Last year it improved to almost 2%.
The good weather in the spring, which drove grain yield up, also meant the start of the decline in wheat, barley and corn prices so poultry farmers and processors can now make a profit. Grigore Horoi says things have gone back to normal and he can now talk about profitability increase again this year, after the lower than budgeted results in the previous two years.
“Things are back to normal, we’re seeing a significant profitability improvement. We already made 8.2 million lei (EUR1.8 million) profit in the first half,” Agricola’s chairman says.
The profit comes from the sales of poultry and from the dry-cured salami business, which generates double the income of the poultry business. The segment, however, accounts for only 15% of the group’s revenue. The group decided to invest EUR1.7 million in its charcuterie plant Salbac in order to boost production capacity by 25%.
Agricola budgeted growth of 10% to EUR22 million of its charcuterie business.
Agricola Bacau group, which consists of Agricola International, Salbac, Europrod and Comcereal Bacau competes with Transavia, Avicola Buzau, Agroli on the poultry market and with charcuterie companies like CrisTim, Caroli and Angst.
(English version by Loredana Fratila-Cristescu)