An English farmer from Lincolnshire is ploughing a deep furrow in Russia’s biggest irrigation project in the fields of the southern Stavropol region.
Robert Covell has been helping to run a 22,000-hectare production business in this part of the North Caucasus – a 1,400 kilometre hike from Moscow – since 2012. The ambitious project by IrriCo consists of 6,500 hectares in new irrigation and a further 1,500 hectares in development producing grain and vegetables. About 2,000 jobs have been created directly by IrriCo and related businesses.
“It’s Russia’s biggest irrigation project by some way,” Covell tells bne IntelliNews in an interview. “We are growing under irrigation corn, soya, irrigated wheat along with potato, onion and carrot and we have various other veg under trial. We have just started building a packing house and veg storage and the first stage of that should come onstream by June 1.”
The IrriCo project is focused on acquiring large scale operating farms in Southern Russia, improving operations with modern machinery and management practices, and installing the latest irrigation technology in conjunction with the existing irrigation canals from the Soviet period.
Once money was raised, Covell helped to find, select and buy farms. He moved to IrriCo initially as chief executive and latterly as development director and board advisor with production and capex oversight. In those role, he bought two farms, completely refurbished and built all systems including machinery, storage, centre pivot irrigation, staffing and production.
Covell has been retained by the company, and is currently concentrated on development of additional irrigation and vegetable production ramp-up. His Twitter account charts the project’s progress as well as the challenges and extreme weather conditions that it faces.
The original plan in 2011 had been to set up an agricultural fund. Russia’s VTB bank was to partner with the international infrastructure specialist Macquarie, but the Australian lender pulled out of the joint venture at the last minute.
VTB had big plans and was seeking to attract from $500m to $1bn of the investments to invest in agriculture all over the country in a phased development strategy. Jim Rogers, the legendary investor and co-founder of the Quantum Group of Funds with billionaire George Soros, was even hired as an adviser to the division.
Sovereign wealth money was committed from Middle East sources, but the Syrian conflict blew up and the commitments were withdrawn.
VTB decided to go it alone and hired away Jason Silm from Macquarie to run its agriculture investments division. Shortly afterwards, Covell was recruited as chief operating officer.
Covell was then asked to come up with another plan and he drew up a project to focus on irrigated grains and irrigated vegetables.
VTB stumped up an initial $25mn and raised another $25mn from KRSK, a development authority for the Caucasus region, and the funds were used to set up IrriCo and to purchase its first farm in 2012 in northern Stavropol.
A second farm in the region was purchased in 2013 after ADM Capital, a Hong Kong-based investment house, joined the venture with a $30mn contribution.
Irrigated by Stalin
Stavropol was chosen because of its existing irrigation system. Soviet dictator Jospeh Stalin forced prisoners in the late 1940s to build a 50-kilometre canal at Ust-Dzheguta on the upper Kuban River, which leads water northeast via the Kalaus River to the Chogray Reservoir on the Manych River.
Fed from meltwater in the Caucasus mountains via a dam on the Kuban River, Covell says the system compares very favourably with large-scale projects built in the West such as the Murray River system in Australia.
“Stavropol frankly had a very good irrigation which you don’t see anywhere else,” says Covell. “It all stemmed from the Kuban River from where they started building a dam in 1949, which was to do flood relief hydro-electricity and irrigation.”
However, many of the canal’s locks and power stations and much of the flood relief infrastructure fell into disrepair after the 1991 collapse of the Soviet Union.
“When it came around to IrriCo, we started looking for land with access to water, ability to expand and ability to have the land in one block and capable of growing corn and veg,” says Covell. “That’s why we settled on northern Stavropol, in the drier areas, where the land is perfectly good but running through the middle is the canal and you have this huge overflow system for the canal that’s been unused.”
The reservoir had 80mn cubic metres of water while IrriCo only required 14mn for its initial plans.
Covell acquired a farm from a local entrepreneur uninterested in farming and found another farm close to bankruptcy.
The irrigation technology has been supplied by Lindsay, a NYSE-listed leader in the global manufacture of irrigation equipment. Irrigation technology allows the production of high value soy and corn with low production risk and consistently high crop yields.
Long road to Stavropol
From English agricultural stock, Covell first started farming in Lincolnshire, in the East Midlands, at the age of 21, in cereals and poultry production in the family business.
By education, he is an agricultural economist but never got to finish university due to his father’s illness. Aged 21, he took over the ownership and management of the business and successfully developed and expanded it. Some three decades later, the farm remains owned by him and is now rented to others.
In 1987, in parallel to his farming interests, he set up a farm machinery business specialising in the import and sale of poultry, pig and grain production systems. By 1998, the business supplied 10% of the UK market. In that same year, he visited Russia for the first time “for a look” to see how he could sell machinery.
Later that year, he moved into the world of corporate agriculture for the first time, becoming a managing director of the GSI Group, one of the world’s leading manufacturer of grain storage and handling systems, pig and poultry production systems. He built up a successful distribution network for the groups businesses, including local manufacture, assembly and inventory.
In 2004, Covell moved to Russia as the chief operating officer for Agrico, one of the largest agro-industrial holdings in the country, with the brief to turn it into a successful integrated operation. During his six years there, the company moved from a pure cereals producer and doubled in size to a 100,000 hectare operation with a vertically operated pig operation of 4,500 sows and finishers, feed mill and slaughterhouse, and an irrigated vegetable operation.
Covell was the only non-Russian and non-family member of the board. The company has continued his path and today has 14,500 sows and 2,200 hectares of vegetables. Covell remains an advisor to the group and spends 25% of his time to this day at Agrico.
In 2010, he left Russia to move to Romania for 18 months as the managing director of the agricultural production unit of a UK-based investor taking over a bankrupt 8,000-hectare farm and turning around all its operations. In late 2011, he returned to Russia after being tapped by VTB.
But this time Covell may be here to stay after meeting his future wife Olga in 2012 and marrying her three years later. Olga, who has worked in environmental consulting and as a business administrator in the energy industry, has since been drafted into the business.
Covell believes the time for irrigation has come in Russia. Sanctions have accelerated the Kremlin’s important substitution drive and the need to stimulate domestic production of previously imported food products.
“The current push on increasing domestic production of previously imported food products has concentrated producers’ minds on how they can increase their outputs,” he says. “Pioneer companies have shown irrigation is feasible despite enormous challenges and in all cases a very steep and ongoing learning curve. Subsidy on irrigation is established, and hopefully maintained despite the budgetary challenges that the Russian government faces.”