International Fur Auction Sojuzpushnina

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Farm's secret

The 2002-2003 fur-season was open at the auction of "Sojuzpushnina" which took place in Saint-Petersburg last weekend. Since pelt sales usually reach their peak in January, there was only a small quantity of Russian fur-farmers" production put up for sale.

Sable was the only fur at the auction which sold out completely - 24 thousand skins. And this didn"t happen merely by chance. Sable is the only kind of pelt which has been produced without cutting down since the time of the USSR. Moreover, half of the farms breeding sable have been taken under the wing of prominent Russian businessmen.

Strategic business

The sable is considered to be Russia"s national property - seeing as it is found practically nowhere else. Strategic fur-resources came under the control of the State a long time ago: it was Peter the Great who, in 1796, issued an edict declaring the State"s monopoly on sable sales. The same edict ordered several pairs of animals to be sent to the capital for breeding. However, the first reliable data concerning the breeding of sable in captivity dates back only to the end of the 19 century (today the territory where the Perm, Archangelsk region and the Far Eastern region lie).

It was only in 1929 the Moscow Zoo succeeded in the stable reproduction of sable. The reproductive technology was immediately classified as secret. Even in officially published scientific works some facts were falsified. An especially strict rule saw to it that these animals were not brought out of the country.

There are many amusing tales told about the Russian sables" adventures in the West. For instance, they say that after the revolution Terenty Kuguluk, a dispossessed kulak from the city of Chita, brought several pairs of animals out of the country via Manchuria. He tried to sell the sables at a fair in Paris insisting that he knew the secret of their breeding. Some American manufacturer bought the animals at the price of one thousand dollars per head. However, the sables died as a result of their long journey across the Atlantic and Kuguluk hung himself after being prosecuted by the American.

In 1987 the "Molodaya gvardya" publishing house issued a book, describing how a western businessman failed in his attempt to get ten sables now for several million dollars. The title of the book is "Operation "Sable"; apart from sables themselves the main characters in the book are foresters from Kamchatka who turned out to be traitors and American spies.

This literary work is still very topical today. The latest detective story featuring the Russian sable hasn"t yet been investigated. In the middle of the 90s one of the farms in the Leningrad region supposedly sold 300 animals to a certain farm in Estonia. Then the sables were transferred to Denmark where farmers on several farms tried to make the animals breed, though with little success. The head of one of the biggest home farms told a reporter from "Money" that he intended to buy out the animals from the Danes, but the deal failed. Another version of the story is that the sables were transferred to Finland and the fur-skins of the animals bred there have already appeared at the fur-auction in Helsinki. It is possible that both stories took place.

In spring 1999 the Russian prime minister Eugene Primakov was to sign the resolution on the prohibition of live sable export. The document, however, was never signed. The fur-farmers sigh: "One more week of Primakov as prime minister - and the sable would have been forbidden to leave the country".

In any case Russia is still nominally holding a monopoly on the sable. The sable is not bred on many farms (the "Pushkinskoe" and "Saltikovskoe" farms near Moscow, the "Biruli" farm in Tatarstan and "Zarya" in Saint-Petersburg) but the total number of sables is increasing year on year. Moreover, Russian fur-farmers are still competing with one another.

Any attempt to establish a sable enterprise from scratch is almost doomed to fail. They sell you a few animals and tell you what you have to do and how you have to do it. But, they will confide to you some secrets and details. In the end you get cheated - however, you are not the first to suffer this fate in the last ten years and you will certainly not be the last.

Wild profits

Sable fur has always been most profitable in inland fur-breeding (in the Soviet time the actual cost of a pelt came to 120 roubles, but it was being sold for $150), but it has been by no means the most popular. Until the end of the 80s about half of the world"s production of so-called caged fur (produced from animals bred in captivity) took place in The USSR - about 13 million pelts per year. About 14 million of these were mink, 2 million - arctic fox, 40 thousand-fox, 300 thousand - nutria and 30 thousand - ferret and 30 thousand sable. Caged fur production has decreased by five times since that period. In 2001 Russia produced 2.7 million mink pelts, 300 thousand fox and arctic fox pelts, and 20-25 thousand sable pelts.

The profitability of fur-breeding has also sharply decreased. In the 80s it was 180 % greater and only poultry-breeding was more profitable in the sphere of agriculture. The explanation for such an abnormally high profit is very simple. Up to 70 % of the actual cost of a pelt comes from the price of feeding the animals. For example, a mink eats about 60 kg of feed (mostly cheap fish and meat waste) every 6 months; from the time it is born to the time it is killed. Before Perestroika a large state subsidy was put on the official prices of these products. As a result, both state farms (they numbered about 250) and small cooperative farms (approximately of the same quantity) - got fodder cheaply. But, it is known, that fur-breeders often bought feed wholesale in village shops and agreed with the heads of cattle and fish farms upon the delivery of food, destined for human consumption. In the beginning of the 80s The Ministry of Agriculture even tried to forbid private fur-farming in the country as a strongly criminalized activity, which it unfortunately was. So it turned out, that the difference in the level of productivity only depended on the accessibility of the animal feed (moreover, demand in Russia was much more than supply and the majority of furs went to the internal market).

At the beginning of the 90s the situation changed abruptly. The price of animal feed increased dramatically but the range of available meat and fish became more limited. As a result, the profitability of fur-breeding has decreased by more than three times. In 2001, at large stable breeding farms profitability turned out to be 50-70 %, and on the average in this branch - it was 25-30 %. They are afraid to predict the results for the current year. The problem is that, from the 1st of January this year their farms have become, not only agricultural producers, but also "agricultural industrial organizations". As a result the profit tax they pay has doubled, and fur breeders say, "they would survive with a great difficulty on 5 % profitability."

Besides this, the fur business is seasonal. The animals are killed in October-November and the pelts are sold in December-January, but animals need to be fed and groomed all year round. When the interest-free state subsidies came to an end, fur farms had to attract commercial investment. There is now no fur farm in Russia which doesn"t have big debts. According to statistics from the Ministry of Agriculture - on average about 3 million roubles each (plus annual fines of 1.5 million). In general, the quantity of farms has decreased by almost 10 times - down to 50 - 60 farms. It was on the debts of the fur farms that today"s fur kings built their holdings.

The furs of the oligarchy

The first, and still the only, private fur farm in Russia private which was founded not long ago (in 1992) is the work of the famous businessman, Andrey Andreev, the former-owner of "Ingosstrach" and "Autobank" (now he is trying to become their owner again). After having resigned from The Office of Legal Affairs with Socialist Property in Moscow, he rented 100 hectares of land in the village of Kresti near Podolsk and built The Krestovsky Fur Complex there (in common parlance "Kresti"). As Andreyev said himself he used the income from the fur business to later buy Autobank. After a few years the owner of "Kresti" bought control packets of shares in other fur enterprises - the "Saltikovskoe" and "Rodniki" farms near Moscow, "Vyatki" in Kirov and "Lesniye kluchi" in Stavropol. On their foundation the "Rus-Pushnina" holding company was founded. The owners of the biggest Russian state fur farm "Pushkinsky" and "Sudislavl" in Kostroma (the later entered "Rus- Pushnina" as an independent structure) were also thinking about saling their shares to Andreyev. However, in autumn last year the representatives of the new owner (the BIN groups) came to Andrey Andreyev`s fur farms.

The group bought four fur farms. The small "Lesniye kluchi" was left to the old owner; "Sudislavl" became independent. The work of "Saltikovskoe", "Rodniki", "Kresti"and "Vyatki" is now being managed by the director of the "Petrovsky passage" department store Tahir Matiev. BIN has got many production problems. Out of four farms only "Saltikovskoe" works more or less in a stable fashion. The "Kresti" fur farm that was being built in a grand style and very well equipped; is now actually bankrupt. They had to beat to death the whole livestock of minks when it became infected with "Aleut illness" (plasmocytosis) - the menace of fur-breeders. The fur farm has huge debts to Autobank and its future is now uncertain. "Vyatka", that was founded in the Kirovskaya region has a lot of sub-companies (from fur shops to a sausage factory), and has both feet on the ground; but it too owes millions of roubles to creditors. "Rodniki" doesn`t play any role: it is a low-powered concern. However, according to the words of the chief of "Saltikovskoe", Alexander Saydinov, the new owners are full of determination to develop the fur business even though they received it as an extra burden to "Ingosstrakh" and Autobank.

The banker Alexander Smolensky also attempted to form a fur-farming holding. This happened in 1997. The "Agropusnina" company that was established by "SBS-Agro" in Vladivostok on shares with a local businessman Mikhail Gusev, was supposed to receive numerous coastal farms, which had formed part of the bankrupt "Dalpushnina". However, the project began to run into difficulties. And then it collapsed completely with the entire Smolensky empire. Today there is practically no viable fur-farming left in the Far East.

The Moscow bank "Zenit" which is close to the company "Tatneft" became interested in fur business at about the same time as "SBS-Agro". It began developing in the Leningradskaya region where the entire group of perspective fur-farms remains. In 1997, the LLC "Severnaya pushnina" was established and included the farms: "Pioner", "Zarya", "Roschinskoe", ""Priozerskoe", "Voronkovskoe" and the "Mezhsovkhozny holodilnik" firm in Vyborg. Later the LLC "Ilyatinskoe" from the Tverskaya region and the "Znavenka" farm from Pskov also joined them. The strategic investor in "Severnaya pushnina" was "Zenit". However, the most powerful regional farms "Sosnovskoe", "Komsomolskoye", "Avangard" never joined the bank"s fur refigerator.

Meanwhile in Siberia, where fur-breeding had traditionally held weak positions in comparison with the fur business, a core consortium was formed. It was built by a businessman from Krasnoyarsk called Alexey Zhukov who had actually monopolized the storage of furs in the region and the neighbouring provinces. Today his family firm "Sibir-Pushnina" fur company" controls dozens of stores, not only in Ural but also in the Leningradskaya, Moskovskaya and Kirovskaya regions.

In the summer of 2000 the unification of "Sibir-Pushnina" and "Severnaya pushnina" began. In "Sibir-Pushnina" they say that "Zenit" is still the biggest investor in fur farms. However, according to fur-breeders from the region around Moscow, their northern colleges are being treated badly and are having to survive on minimum necessary investments. Besides this, "Severnaya pushnina" is trying to put in order centralized production and distribution of fodder.

According to information from unofficial sources "Zenit" is going to take part in the privatization of "Sojuzpushnina". The bank has been cooperating for a long time with this institution which is, for the present, a governmental institution and it has been financing both "Sojuzpushnina" and fur-suppliers. The approved budget programme for the coming year is estimated at 9 million dollars.

Undivided pelt

Although, at the moment the most powerful home farms (those of the Kaliningrad region) are only taking their first steps towards merge they are the most profitable farms which produce about one third of the total amount of Russian fur. In June they formed an association called "Baltpushnina", though, officially there isn"t any talk of pooling share capital yet. Nowadays every farm has its owner and there are some foreigners among them. For example, more than a quarter of the shares from the "Prozorovskaya" farm are owned by Gaston Francetich, the president of the Italian fur-company Francetich SPA. The fur-farmers from Kaliningrad cooperate actively with their Danish colleges and often send the furs they produce to auctions abroad. A Fur-holding owned by western a businessmen will, most likely, be formed in this region.

However, it"s doubtful whether the leaders of European fur-farming - The Danes and The Dutch - are going to be among these businessmen. Yet, at the beginning of 2002 this seemed to be more than probable. After that, in 2002, a ban was put on breeding fur-bearing animals in England and Greenpeace activists livened up their activity both in Holland and Denmark. The governments of these two states were ready to meet the ecological movement half-way. Applicable bills were worked on and almost approved in Holland, in this connection local fur-farmers began the quick re-location of production to Poland. However, in the summer the new Dutch government rejected the idea of down-sizing the fur-business and decided that the "fur-law" would come into force in 2010. Denmark followed its neighbour"s example. That"s why the Russian fur-farming business has lost its chance of getting large investments, at least within the next 5-7 years.

In any case, Russia is still more than a prospective fur-market. In total mink-fur consumption in our country is 9 million fur-pelts per year. Now 80% of this amount is import, mostly illegally. So fur-magnates have somewhere to develop.

Renata Yambaeva

"Kommersant Dengi"("Merchant. Money") - 10.12.-16.12.2002

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