The Innovative and the Best Traditions of German Family Agribusiness

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The Innovative and the Best Traditions of German Family Agribusiness Add to Their Armoury Progressive Agricultural Enterprises with 100% Share of Ukrainian Investments 

Company Horsch (Germany) is a shining example of German family business, which is a base of economy prosperity of Germany, the most developed country in the EU. Business of Horsch is a symbiosis of successful projects in farming and agricultural engineering spheres. Family agribusiness is among of the hundred greatest agricultural producers in Germany that is 15 modern farms, which service more than 20 thousand hectares of land in the EU. Five modern factories, which produce highly-technological agricultural machinery Horsch, are located in Germany, the USA and Russia, their production is supplied to dozens of countries.

Private enterprise Zapadniy Bug, an enterprise with 100 percent share of Ukrainian investments, is one of the greatest agricultural producers in Western region of Ukraine. The agricultural enterprise is a raw materials base of sugar factory, which during last two years had the highest volume indicator of sugar beet working up among Ukrainian sugar plants. The Zapadniy Bug services more than 35 thousands hectares of land located in Lviv oblast.

Agribusiness becomes an important sphere for new era of Ukrainian economy. Competitiveness for dominance in agricultural market of Central and Western Ukraine is becoming tougher. To remain a full owner on own land the necessary are brands understanding of world agribusiness, implementation of advanced agricultural technologies and clear idea of business model of future agricultural enterprise in accordance to world standards.

A shining example of new generation of domestic agribusiness that is orientated to the world standards is private enterprise with 100 percent share of Ukrainian investments Zapadniy Bug. This business project can quietly be considered as one of good examples for intensive development of domestic agriculture as of fundamental Ukrainian economy branch.

Autumn of year 2014 for the Zapadniy Bug was commemorated by a new stage of collaboration with company Horsch (Germany). Series of demonstrations of agricultural machinery Horsch on fields of the enterprise and two business tours, which were organized specially for top management and for investor of the Zapadniy Bug, to one of farms belonged to the family Horsch preceded to that. Among 15 this farm was bought the last one just two years ago and it is an obvious example of impetuous reformation of post-Soviet collective farm model enterprise to one of the most modern European farms.Organizers of those events were company Horsch-Ukraine and Agrobuilding Alliance Astra, which during last seven years is an official sale dealer of agricultural machinery Horsch in Ukraine and supports service maintenance of sold machinery.

In spite of being busy, Michael Horsch the chief and ideas generator for family business not just twice personally met representatives of the company Zapadniy Bug in his new farm in Czech Republic, near Prague, but also found possibility to visit on 23 rd of September the head office and company structure departments in Lviv oblast to learn better business conditions, share experience with his partner, Vitaliy Sikorskiy and his team.

As being responsible for work with company Zapadniy Bug from the side of the official dealer ABA ASTRA I meant not just possibility to be inside process and to participate in organization of all events, but also to put questions to the businesses shareholders as during two trips to Czech Republic, also during seminar for managers of all levels in a conference hall of the Ukrainian company head office and directly in field. In the article there are quotations from the seminar and also interviews with representatives of German and Ukrainian companies, which could be interested for a wide range of the domestic agricultural producers.

Dear Michael! Brand Horsch is recognized intheworld agriculturalmachinery market. At the same time Your agribusiness includes 100 of the greatest agricultural producers of Germany. Who are You, firstly: an agricultural machinery manufacturer or a farmer? What is the major rule of successful projects symbioses?

I am a farmer; our family during several generations has engaged in agriculture. I did not finish any universities, and in 22 became a businessman. I agree with words of my school teacher: when you know that you know, you know much more. My results in the business I achieved by trial and error method. Itisaruleofmylife.

How was the Horsch family business developed?

In Germany average area of farmers enterprises is 25 ha; my family belonged to a number of larger farmers. During years 1965-1967, after the war, most barons and graphs went into industry and sold farms; that was first chance for new farmers generation, such as my father was. The family expanded its land bank firstly to 200, and then to 500 ha; that was another business level. I am the eldest among children; I have 4 brothers, who also work in the family business. We are successful, because always did different than others did. Double-hulled plows and tractors 30-40 hp, those were not enough yet for housekeeping on area in 500 ha. We started to think about how to change our farm, but there were not a science about that and needed agricultural machinery. Our family gained the experience independently. By the way, I, my brothers and our cousins grew up. Weworkedagainstscienceandlivedit.

In 1972 I came back from the States, where I had got much knowledge about no-till and far-reaching agricultural machinery. During that time there were now free lands in Germany. I started looking for what to do and how to earn money. I came to my father with painted on a paper first car, my father believed in me and financed at once manufacture of first seeders for family business. It was my first order! I just wished to earn a little on it, but fate decreed otherwise. I starter to produce seeders and cultivating machinery, but agricultural machinery market was not ready for that. I learned soil structures, its changes and already through 10 years those professors, with whom I had argued earlier, talked to me on an equal, as with a professor, who has another point of view and well understands in the matter. At that time I had more losses than successes, but I filled up my bank of knowledge. With the Union collapse enormous markets in Czech Republic, Poland, Russia and Ukraine were opened Then our factory with the number of staff just 10 persons got chance for rapid development and I used it. It was happiness. We outputted mainly for Eastern Europe far-reaching equipments, first seeder in 12 meters was produced in 1984. Life taught me that if you wish to be successful, you must have a dream, even if it is for many people incomprehensible and it is right. Withoutdreamtherearenochancesforrealsuccess.

In 1990 sales volumes of agricultural machinery of domestic production swept off-scale yet. It gave a possibility to expand factorys manufacturing areas and to use second chance for agribusiness expands. We began to buy agricultural enterprises in Eastern Germany, where experience on moldboardless technology was applied, which our family had enough. In 2000 we enlarged the agribusiness at the expanse of buying enterprises in Czech Republic. Last farm, which we had purchased in 2011, You and our colleagues from company Zapadniy Bug had possibility to see by your and their own.

HORSCH Machinery it is 5 factories with a high level of specialization, three among which are located in Germany, one in the U.S., and one in Russia. We output agricultural machinery in the following segments: direct sowing machines with working width from 3 to 24 meters, precise sowing machines up to 36 rows, cultivators, disc harrows, grain loaders, trailed sprayers from 6-8 thousands liters, self-propelled sprayers of 4-6 thousand liters. Today we are only one in the whole world who lowers the bar up to 30 cm. We sell agricultural machinery and equipment all over the world, most part of deliveries goes to Western and Eastern Europe, approximately 70 percents, the remaining are markets of Canada, U.S., Brazil. Through 2-3 years we plan to build plant on production of agricultural machinery for soybean in Brazil. The plants situated in Germany You also had possibility to see by Your own.

To respond to the processes promptly, which occur in a market, I spend a lot of time in trips around the world and share my experience with partners. My schedule is assigned for a long ahead; this week I am in Europe, the following week in the U.S., next week in Australia, and so every year during last many years. No one university will give so much information and knowledge.

History of Your business development is impressive. What is in the role of acting force for a businessman? Where does success begin?

For a start it is necessary to have a dream. Without a dream it is impossible to create something or to change something. If a businessman makes his business just to become rich, it is the easiest. The history teaches that it will lead to nothing, sooner or later God will say: Go down!. Businessman needs money to try to something on his own and if he works not just for himself, but also for people, for his employees, partners, then he gets chance to develop and to be recognized. That I learnt from my grandfather and my father, and I teach my children so. Many successful businessmen work according to this rule. Reality begins from a dream.

Please, tell us about Your experience in Ukrainian market and cooperation with the Zapadniy Bug.

I have cooperated with Ukrainian agrarians from 1992. All stages of post-Soviet development I went through with them. I well remember the time when collective farms were developing and also firms that replaced them. I am familiar with the second generation of agricultural enterprises, which do their business successfully. I learnt a lot from agrarians of Ukraine, Russia, Kazakhstan; I like coming to my partners, to share my experience and to give such seminars as today.

With company Zapadniy Bug we started cooperation last year with delivery of seeder Pronto 8. Together with our dealer ABA ASTRA we demonstrated agricultural machinery by our production on fields of Lviv oblast, met several times with the business shareholder and his top-management in our firm in Czech Republic, where they shared their experience. During our last meeting, I was invited to talk about some ideas, over which we will work together. I am not an adviser, and dont like them. I didnt come to teach how to live or how to build business; I can just tell how I would do in a particular case. Not always everything I say works. For example, my three brothers say me: Dad, you have success, but we have our own ideas, we want to do on ours. Andthatisright.

What did you talk about at todays seminar? At what major questions have you concentrated attention of the shareholder and the management of company Zapadniy Bug?

I was pleased to speak to such big quantity of specialists. It is very important when shareholder of an enterprise gives possibility for the management of different levels to express their views during discussion of strategic decisions and of the companys future. Todaysseminarhassuchformat. 

It is necessary to understand the world brands for planning of agricultural project. Today grain is the largest and the most forecasted segment of world agricultural production, which annual production volume is 2.5 billion tons (wheat, rice, corn). Thanks to population increase, to food structure changes the world market during last ten years consumed as much as produced grain crops, and cost of one ton of corn and soy has already reached $300-350. There is one zone in the world, 1000 km in width, where major grain production is concentrated, that includes also Ukraine and Germany. The biggest producers of this zone are the U.S., China and Europe countries. The same climate, almost the same harvesting periods make possible to forecast prices for harvest. For example, if precipitations are in May, harvest will be big, it means that to common world balance will be added 100-200 million tons. In such case price for grain will be low. During last years we observe increase of difference between maximal and minimal prices, in further this difference will be increasing. To learn how to forecast and to manage in such conditions is a great skill. One of my management rules consists in the fact that agricultural enterprise must have its own storage with capacity in 1.5 times more than annual harvest. It allows to store harvest as long as it is necessary and to sell agricultural production to traders just at maximal prices. I do not conclude futures contracts, do not deal with a brokers board and do not need dealer services. There are I, my bank and a buyer, who is able to pay the maximum.

What should a modern agricultural enterprise be to withstand hard terms of the competition, as a lot of the capital went to the agricultural sector?

Earlier agricultural sector was not in a big interest for a large business, but tendency to difference increase between maximal and minimal prices for agricultural production with each year makes this business more attractive for big capital. They have huge resources, understand how it works, but will not realize soon that they are dealing with production in open air on large territories. A land owner will always endeavour to get the maximal lease payment. It is a law; nobody and nowhere will be able to change this process. Just more effective agrarian can pay more. Not to allow competitors to get your land, You should be better and more effective than those, who want to farm on Your land. Your future starts today! If You are growing, than you should get the largest income for a ton of production and to reduce your charges.

In my opinion a modern agricultural enterprise not just in Ukraine, but also in countries of the EU, the U.S. and others, has the following basic terms:

  Serviced are - 3 000 ha;

  Annual production volume - 25 thousands GU. Where GU grain unit,  GU = 1 ton of wheat or 1,1 tons of corn or  0,5 tons of rapeseed etc.

  Number of employees 10 persons (not including office workers, just specialists and a management);

Certainly, much depends on geography, sowing time, harvesting, management and others factors. That is why area in some cases can achieve 5 thousands ha. In such case other major figures will proportionally increase. These measures are for competitive agricultural enterprises of leading countries of the world agricultural business. If You do not pay attention to Your land, than over time there will be hosting more successful farmer. Practical potential of Ukrainian agrarian should be higher than 80 centner per hectare for wheat, 40 centner per hectare for rapeseed, 600 centner per hectare for sugar beet. 

How much should owner invest approximately into agricultural machinery to provide uninterrupted production process of a modern enterprise?

Investments into agricultural machinery and equipment will be at list $2.5 billion. The amount does not include investments into storages. These are two powerful tractors, one or two combines, self-propelled sprayer, cultivating equipment, wide-cut seeder and several logistics machines. Investing into new enterprises I follow one important rule: I renew machinery park entirely and during production process do not mix new agricultural machinery with used ones. Otherwise, it is impossible to achieve the maximal effect from the investments, and they are significant.

With what requirements should comply a chief manager of a modern agricultural enterprise?

He should 24 hours a day be available for land and plants, be familiar with every square meter on his field. All my brothers are in the enterprise during whole days. Every time when I call anyone among them, I catch him inside a combine or a sprayer, on a field or in a car, because they wish to see what happens on the field, they always are on the alert. At the table we usually do just final version of the business-plan. They know perfectly land, understand plants, know agricultural machinery very well, are able to adapt any complicated machinery on a field and know logistics well. If a chief manager spends in his cabinet not more than 1 percent of his labor hours, it is an indicator of one of the best agricultural enterprises; if he spends 10 percent it is indicator of a middle level and lower.

You will not learn how to do this in university, it is called multitalent. Agriculture is one of the hardest businesses. It is production in the open air on a very large territory and if you wish to be the best you have no choice, you should 24 hours a day be available for land and plants. It is strong side of an average agricultural producer. In agricultural holdings an agronomist is on 15th floor of business center and gives directions to locations. Could this holding be competitive? It hardly will be able to stay in the market for a long.

What does social responsibility mean for an owner of a modern agricultural enterprise?

As owner has social responsibility to people, his task is to predict timely and to build a profitable business, so he should feel instinctively objects, on which agricultural enterprise should specialize, and requirements, to which it should satisfy. If an enterprise pays a little to a big number of people and goes bad, is that social responsibility? We came through that and we know the result. The most important function of a modern agricultural enterprise is a possibility to tell employees how we will develop, rightly pay their labor and to allow them to develop professionally, if the enterprise wants be always competitive on the labor market.

What problems do You have to face and what problems are typical for Ukrainian agribusiness?

Kolkhoz virus! It means stop innovation! The hardest problem an agricultural enterprise has to face not just in ex-Soviet countries, but also in the whole world, is a kolkhoz virus. He is alive and works, everyone has virus. When we work it is inactive, but when employee does not have any motivation, the virus becomes active, and if two employees do not have any motivations then virus is twice stronger and hereinafter on  the rise. It stops logical thinking, working process lefts unattended. The virus tells that now something exactly will brake and then it will not be needed to hurry and it will become not your problem, but chiefs problem... There is no prescription treatment of this virus, but there is a therapy for its management. I do not economize on people, I wish every employee has a high motivation degree, honest system of labor payment and wait for return corresponding useful effect. It is one of my most difficult matters.

Please, tell about, at list, several ideas, which were discussed at today seminar?

Two years ago in Czech Republic a new enterprise entered into our agribusiness. It was classical kolkhoz, an example of post-Soviet period, 3,300 ha, 1/3 black earth, 1/3 mud and 1/3 sandy soil (35/35/65 points), uneven fields surfaces. Harvesting: wheat 30 centner per hectare, barley 28 centner per hectare, rape 18 centner per hectare. Dairyherd 600 heads, 120 haundergardens, 58 tractors, 77 employees.

First of all we separated milk production from crop, started to build new cow bards, and now this business makes a little profit. For main direction of activity we determined exact conception of technologies in accordance with the enterprise size, soils etc. The structure of sowing areas for this farm is the following: 25% - rape, 25% - corn and 50% - wheat. In the end of first season we got rid of old agricultural machinery and pulled down old buildings. From 77 employees we remained two persons, who were ready to cardinal reorganization and took on new employees with a high level of motivation. One important principle more is that changes should be quick, otherwise it will cost much more. We created park of the most modern agricultural machinery according to the plan of the enterprises intensive development. We plan to build new base, it will be just one building, where office, workroom and spare parts warehouse will be. We are building elevator with drying, first turn was putted into exploitation in winter this year, and we purchased Canadian grain elevators.

Now we are working on new project, in which there are questions more than answers yet. It is not an invention, in Australia many people work on this, but in Europe there are at maximum 10 farms. Wehave workedupourconception.

It is system Horsch CTF, it means a total control over everything that happens on the field.

Here is a simple example: on a field that is sowing by rape we can see all irregularities and un-even field tillage It does not have anything common with the highest harvesting indicator. To achieve a maximum result it is necessary to have fewer machines but with bigger efficiency and higher work quality, and thus it is necessary to decrease quantity of passes and to minimize soil puddling. A wheel of a tractor or of other agricultural machinery exerts pressure on the sides and slumps, caterpillar makes plank and firms just 15 cm of top soil layer, makes it like concrete, lower 15 cm it is possible to pick soil by a hand. For the width 12 m I need just two additional chisels to rip the seal, it is very cheap.

That is why all machinery in our field is on caterpillar, among them are grain elevators and fertilizer spreader, the exception is just self-propelled sprayer.

Our goal is to have not more than 15% of soil compaction for all works, including logistics. Next is digitization of the fields, fully automated process control. All points, posts, every radius etc. are inputted into the system. Different situations, sprayer direction with bar width 36 m, directions of sowing, harvesting and logistics machinery by 12 m are modeled. At that all agricultural machinery, including new, highly productive fertilizer spreaders, which were specially developed and experienced in this farm on caterpillar and have track width 3 m. It is the future, bases that are being founded today.

One important matter more is logistics, which is also my hobby. During last 5-6 years we stopped usage of tractors for these goals. Weusejusttwo-axescarswithoutsoldering. 

Grain carrier could be used all the year round. Body is replaced for five tons tanks for filling-up of sprayer, seeder or fertilizer spreader. Driver sees on his i-pad where should be delivery the cargo to optimize route and to exclude stoppages. The sprayer filling-up takes just 3-4 minutes, at the norm 50 liters for 1 hectare we get 100 hectares of tilling ground for one filling. Optimizing logistics it becomes possible to economize millions.

One question more, which we discussed on bases of one department of the Zapadniy Bug in Zhvyrka, is about software. Currently, there are no an integrated program in the world, by using which it is possible to control all processes. Agricultural producers today use different products, many monitors, and they can be called local control elements. These are similar for our enterprises. But already approximately after 3 years one integrated program based on android can be, which will be not just control element, but also significant help for management and for operators. Whole data file will be kept on enterprises virtual server. Our task is to use this as a phone, when an operator receives task on his I-pad in the morning, implements it, and every act is controlled and in any moment it can be strictly analyzed, if it is necessary. These are just partial of questions, which we discussed within the framework of company Zapadhiy Bug visit to us in Czech Republic and during my seminar for the companys management. I am plumb pleasant to deal with people, who think about future and love their land. Discipline in a field is respect to the land!

Katsyupyr Vasiliy Vlad., General Manger of Zapadniy Bug PE

Private Enterprise Zapadniy Bug started its activity in 2003 with service of 2 thousand hectares. Today we produce agricultural production in area of 35 thousand hectares. These are 8 structure departments that service from 2.5 till 7.2 thousand hectares. Our organizational structure has something in common with the model of Horsch agribusiness. The structure of our sowing areas for today is following: sugar beet 25%, it is our specialty, further, wheat 45%, barley 15%, rape 7%, remained are soy, corn. On last year results harvest was: beet 500 centner per hectare (max 680), wheat 50 centner per hectare (max 60), rape 33 centner per hectare (max 42), corn 85 (max 95). This year result on grain crops is 72 centner per hectare. We know Ukrainian lands potential, that is why do not worry to set ambitious tasks and according to plan move to European indexes of harvest and of agricultural production quality.

During 11 years we have fully renewed our agricultural machinery park, last combine of Rostselmash production we sold last year. We understand perfectly well that to achieve high results in the field is possible just at economic, highly productive exploitation, and the major at reliable agricultural machinery. Just machinery of western brands response this requirement today. Our park practically for 100 percents is completed by new machinery of the world markets leaders: John Deere, Claas, hallenger, Case,Horsch, JCB, Amazone, Ropa etc.

Collaboration with company Horsch is of special interest for us, because purchasing qualitative, highly technological agricultural machinery we get consultancy support from one of the greatest producers of agricultural products in Germany, country that is the greatest agricultural producer in the EU. It is unique chance for enhanced studying of innovations experience and European agribusiness traditions. Not just modern agricultural machinery is of big interest for us, but also the newest technology solutions and organizational structure of Horsch agribusiness, but also understandable and close philosophy of modern agricultural enterprise, which can compete in hard terms of globalization.

Vitalii Mietolkin

Response person for work with VIP clients of ABA ASTRA LTD

Redactor of web-portal about agricultural machinery market

Specially for APK Inform

Translated by Natalia Dragnieva

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