Cavalli: "The cost of a fruit storage facility construction has doubled in three years"

In the Russian Federation, a shortage of fruit storage facilities is observed due to the active development of intensive orchards. As the South is among the leaders in terms of harvested areas, the market capacity in these regions is higher

At the YugAgro exhibition, Daniel Cavalli, Director of the Russian branch of Fruit Control, discussed with RBC TV Yug the difficulties of fruit storage facilities construction and whether the year of 2023 was good for the Italian company in Russia.

Daniel Cavalli, Fruit Control

On the market attractiveness

Is there a shortage of fruit storage facilities in Russia now, and how well do the regions of the South of the country look in this context?

There is a very large shortage, because the rate of development of intensive orchards is very high. And many fruit growers who do not have storage facilities, they still continue to plant. This attracts profits. The logic is that I plant 10 hectares, and after a year or two I harvest and sell something. The profit of storage facilities is not so obvious, and the amount of investment in them is very large. If I can plant an orchard bit by bit, 10 ha per year, then storages are a very large lump-sum investment, so many people do not even consider this for a long time. And now there is a gap, as they have planted a lot, but there is no place to store the harvest. At the same time, problems emerged in the economy, because construction and equipment became very expensive, and the exchange rate rose. All this adds challenges for fruit growers when it comes to storage facilities construction, which is why they ask the government for more support. But without a storage facility, an orchard is unprofitable, so it will have to be built in any case.

One who has a space where to put the harvest and save it at least until spring can earn quite a lot and pay off the investments in the storage facility. Another problem is the market volatility, namely the sale of fruits. That is, it is difficult to predict the price. Everyone understands that the price will be more profitable in the spring than during the harvest period, but it is difficult to say how much more profitable from year to year.

Is there a shortage of fruit storage facilities in the South as well? If so, how significant is it?

It is rather significant. It is difficult even to estimate it accurately enough. When I personally go to fruit growers, I see that wherever I go, they all need storage facilities. Someone is closer to its implementation, someone is just thinking of it, someone wants to, but is short of money. But there is no such thing that I visit someone who has intensive type orchards and he does not need storage facilities. It can be said that almost everyone needs them now.

How much has the cost of the fruit storage facility construction itself changed over the past year?

Prices have not increased that much this year. Price jumps were in 2019–2020. Compared to how much the construction cost was three years ago, it became twice more expensive. Maybe even more. But three years ago I also heard that construction and equipment were expensive, the exchange rate was unprofitable, and it was all true. But they were building storages anyway, because it was necessary. And now, too, there is nothing to do without them. We are trying to adapt to the current realities, because our company is highly specialized.

This year we talked to Oleg Sirota, Chairman of the Council of the People's Farmer Association. He noted that for the South, apple growing is virtually the most promising trend in agriculture for new market players now. Is this so, in your opinion?

This even came into some fashion. To date, it is still a profitable area. But there is also interest in other crops, because there are plenty of apples. Nowadays companies are looking towards berries and pears. And here the difference is that they are more difficult to grow and the payback period is a bit longer. But now the first one who addresses these challenges and makes high-quality investments can make good profit.

Foreigners in Russia

You are a European company, your headquarters is in Italy. How have the working conditions in Russia changed for you over the past 2 years?

Honestly speaking, it was in Russia that we did not feel any difficulties. We have a Russian branch that represents the Italian company. And we, as a fully Russian legal entity, work without any additional problems. What has changed a lot is the logistics from Europe. We had to find solutions to enable delivery of some equipment and materials. But we found these solutions. It was not easy, but it worked. The fact that we are implementing a project in Dagestan this year is an indicator that everything is working well. The most important thing is that the parent company in Italy has no obstacles. We want to work the same way.

How was the year of 2023 for your company? Was it more difficult than 2022?

It was more difficult, but more interesting. Our work was more active and vigorous. But in spite of the new difficulties that we faced, it was interesting and productive. A very important project was implemented — a fruit storage facility in Dagestan, which will be indicative for us and for our technologies. This is the most southern orchard in Russia, because it is located right on the border with Azerbaijan. We negotiated and worked with them for a long time. This year we finally succeeded. We managed to implement this project for storage of 10 thousand tons of apples and pears. Now a 5 thousand tons facility will be put into operation – this is a sorting facility. It is not a truly major project by Russian standards, but it is quite large and interesting in terms of the specifics of the stored product. Pears are not a very developed crop now. Farmers are just starting to actively plant and grow them. We want to show how we store them, using what technologies. This project costs about 1 billion rubles in terms of about 10 thousand tons of products.

What are your impressions of the YugAgro 2023 exhibition that you participated in?

We take part independently for the third or fourth time in a row. The event organization is top-level as usual. A lot of people, attendance is high. Why is this exhibition so attractive? Because there are a lot of new potential customers and partners. We will continue to exhibit, and maybe expand the stand.

The 31st International Exhibition of Agricultural Machinery, Equipment and Materials for Crop Production YugAgro 2024 will be held on 19–22 November at the Expograd Yug exhibition centre, Krasnodar. Free electronic registration for visitors is already open on the official YugAgro website.