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Russia’s agriculture sector continues to BOOM in face of Western sanctions

A major economic shift unremarked by the West, while multiple production dimensions come on line.

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Much is written about the vast strides Russia has made in matters agricultural. The many different Cheese types that were previously imported are now largely produced in Russia. The gains are across the edible board, from poultry, fish and pork through to fruits, vegetable and grains. Grains specifically have shown strong and steady growth due to increased investment as well as using the latest management and production technologies.

For example, wheat harvests in Russia are now not only satisfying Russia’s national demand, but also form a significant and steadily increasing part of the country’s global exports. In Soviet times, world traders and specs eagerly awaited the announcement of the wheat harvest or its forecast potential. To those punters on the world’s futures exchanges it usually signaled how much the USSR will BUY over the coming year to meet its internal needs, as they didn’t ever SELL. That has radically changed, much like the country, its direction, politics, beliefs, abilities and its people.

One small but glaring opportunity gap in this growth curve has only recently come to active investor attention, and is finding real support from the financial institutions in Russia. This gap is in the range of products and ingredients derived through the deeper processing of raw materials, in this case grains. These little known, not off-the-shelf products are an essential part of the processing and manufacture of almost all foods and beverages, and a number of pharmaceutical products, even textiles.

These ingredients are exclusively obtained through deep processing and treatment of wheat and other grains. They include dry wheat gluten, modified starches, glucose-fructose syrup, molasses, and feed mixtures (as a by-product of the technological process).

These products are widely used for not only food production, but also pulp/paper manufacturing, in low-alcohol and beverage industries, pharmaceuticals, cosmetics, animal husbandry and in several other industrial sectors. The demand for these products both domestically and in the global markets is strong and continually growing.

In general, only 10-12% of such ingredients are produced in Russia while 88-90% must still be imported. The irony of the situation is that one of the major raw materials used to produce these products is wheat, which has been steadily growing to large surpluses these past several years. Today several multinational firms involved in agricultural processing like Cargill, Archer Daniels, L. Dreyfus and several Asian groups have already started either through M&A or through investing in their own processing to begin filling this void inside Russia.

Russian agricultural companies have been quite active too, as deep processing of grain results in products with far higher economic benefit than simply selling raw material or milled flour/starch. Establishing such deep processing projects also addresses the challenge of partial or even complete import substitution. These valuable and increasingly demanded ingredients can easily use even extremely low grades of wheat as perfectly suitable raw materials, which without deep processing are close to valueless.

One example is a start-up in the Kursk region, which is part of the famously fertile “black earth” area of Russia. The company, a 100% Russian start-up called OOO “InnPromBioTec” is a group of young and experienced professionals in the food processing industry. Their expertise has ranged from implementing and successfully commercializing production of food ranging from low-fat mayonnaise to fermented “kvass” (a traditional Russian grain based beverage), as well as oil from various grains. Today they are in the process of establishing a technologically cutting-edge deep wheat processing facility in the middle of this grain rich region.

With sanctions in place, while they officially do not impinge of food production or foodstuffs, they do and have affected the attitudes of traditional investors in the USA and the EU, not to mention the non-Russian banks. There is a palpable fear among the potential and logical investment partners in both the EU and US not to bend, therefore dismissing profit, rather than risk forging ahead and perhaps facing politically unstable censure from their own countries.

This Kursk based company therefore shifted its focus to the Far East, specifically China, Japan, Thailand, Korea and possibly India. This, while the most cost effective points of export realization and ready markets demanding such deep processed products are next door in Europe, who also import, albeit to a lesser degree, to meet their production requirements.

From an economic perspective, projects such as InnPromBioTec’s are attractive, especially in today’s markets. The capital required for such technologically intensive production is about 150 million Euro equivalent to process 250,000 tons per annum. Russian banks are willing and prepared to lend fully 80% of the needed capital as project financing, and the government affords a number of easements and incentives to make such projects as riskless and transparent as possible as they are considered a national priority, and are therefore quite secure and problem free.

Projects like this are not immediately operational, they must be planned as well as built from scratch, and this has been the bane of long term investing in Russia. Local investors want huge returns on their money and they want it almost immediately, therefore Greenfield projects have tended to suffer neglect.

Projects like deep wheat processing have a very long productive lifecycle, measured sustainably for decades with their products in perpetual and growing demand. Typically, the discounted payback period is from 6 – 7.5 years, with an internal rate of return of approximately 40%, profit margin realistically near 50%.

It looks like Russia’s steady economic evolution away from simply exporting raw materials, but opportunities to deepen the dimensions of production will be financed by visionary, practical and pragmatic Asia. The products of which inescapably will be demanded and consumed by Europe one-way or another, if only because of the secure price of proximity.

At a deeper level, this one project example is indicative of many similar projects coming into being throughout the length and breadth of Russia. The vast soybean farms in the southern parts of the Russian Far East have historically simply sold and shipped the harvests unprocessed across the border into Asia. Today, projects are starting up to add value to these crops by processing some of the myriad products obtained from soybeans both for internal consumption as well as for ready export markets literally next door.

The list goes on, with one of the longest coastlines on the planet (23,000+ Miles), the opportunities for fish, mollusk and crustacean farming is vast. The relatively low cost of energy in Russia and no shortage of fresh water also allows for controlled environment farming regardless of climate, be it hydroponics, greenhouses or commercial scale urban agriculture year round. All of these opportunities afford similar value added dimensions through processing and producing market ready finished goods.

On reviewing Russia’s economic path it is worth noting that it has managed to rebalance its exports from 70 percent energy in 2013 to 59 percent in 2017, according to the World Bank. As of this writing, the budget is again in surplus, and government debt stands at a notable 33% of GDP, the lowest among all of the G20 nations. Inflation is now running at a record low of 2.4% year-over-year, well below the CBR’s target of 4% and food inflation despite sanctions is close to 0%. Simply to contrast, and yes, sizes and volumes do make a difference, so just to cherry-pick: The S&P 500 Index is up just a tad over 13% for the past year, while at the same time the MOEX Russia Index has shown 21+% growth with an attractive 6.46% dividend yield, compared to 1.94% for U.S. stocks.

A major economic shift is occurring as secondary, tertiary production, manufacturing and the support and services infrastructure businesses establish and develop inside Russia. Some projections indicate that in these new business areas Russia will show a sustainable 5-6% year on year growth from 2018 – 2020, and perhaps greater. Incredibly, it is woefully under-reported even by the international financial press.

These secondary and tertiary industries have been historically left to the outside world to import into Russia. Be it in agriculture, textiles, machinery or oil patch technologies, Russia is now steadily filling these internal niches, and the opportunities for investors today have vastly expanded into many previously ignored dimensions. It only requires the business will and clarity of “blinders-free” vision to investigate, get involved and step up to the table.

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Putin, Trump meet in Helsinki for first bilateral summit

The Helsinki summit is the first ever full-fledged meeting between Vladimir Putin and Donald Trump. Their previous encounters were brief talks on the sidelines of the G20 and APEC summits in 2017.

Vladimir Rodzianko

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Russian President Vladimir Putin and US President Donald Trump are meeting in the Finnish capital of Helsinki for their first bilateral one-on-one meeting.

Trump arrived in the Finland capital a day early, while the jet of Putin, who wrapped up his nation’s hosting of the World Cup Sunday, touched down around 1 p.m. local time and the Russian president’s motorcade whisked him straight to the palace where the two world leaders are meeting.

Trump signed an August 2017 law imposing additional sanctions on Russia. The law bars Trump from easing many sanctions without Congress’ approval, but he can offer some relief without a nod from Congress.

Almost 700 Russian people and companies are under U.S. sanctions. Individuals face limits on their travel and freezes on at least some of their assets, while some top Russian state banks and companies, including oil and gas giants, are effectively barred from getting financing through U.S. banks and markets.

The agenda of the summit hasn’t been officially announced yet, though, the presidents are expected to discuss global crises, such as the Syrian conflict and Ukraine, as well as bilateral relations.

Stay tuned for updates…

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“Foreign entity, NOT RUSSIA” hacked Hillary Clinton’s emails (Video)

Rep. Louie Gohmert (R-Tx): Hillary Clinton’s cache of 30,000 emails was hacked by foreign actor, and it was not Russia.

Alex Christoforou

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A stunning revelation that hardly anyone in the mainstream media is covering.

Fox News gave Louie Gohmert (R-Tx) the opportunity to explain what was going on during his questioning of Peter Strzok, when the the Texas Congressman stated that a “foreign entity, NOT RUSSIA” hacked Hillary Clinton’s emails.

Aside from this segment on Fox News, this story is not getting any coverage, and we know why. It destroys the entire ‘Russia hacked Hillary’ narrative.

Gohmert states that this evidence is irrefutable and shows that a foreign actor, not connected to Russia in any way, intercepted and distributed Hillary Clinton’s cache of 30,000 emails.

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Via Zerohedge

As we sift through the ashes of Thursday’s dumpster-fire Congressional hearing with still employed FBI agent Peter Strzok, Luke Rosiak of the Daily Caller plucked out a key exchange between Rep. Louie Gohmert (R-Tx) and Strzok which revealed a yet-unknown bombshell about the Clinton email case.

Nearly all of Hillary Clinton’s emails on her homebrew server went to a foreign entity that isn’t Russia. When this was discovered by the Intelligence Community Inspector General (ICIG), IG Chuck McCullough sent his investigator Frank Ruckner and an attorney to notify Strzok along with three other people about the “anomaly.”

Four separate attempts were also made to notify DOJ Inspector General Michael Horowitz to brief him on the massive security breach, however Horowitz “never returned the call.” Recall that Horowitz concluded last month that despite Strzok’s extreme bias towards Hillary Clinton and against Donald Trump – none of it translated to Strzok’s work at the FBI.

In other words; Strzok, while investigating Clinton’s email server, completely ignored the fact that most of Clinton’s emails were sent to a foreign entity – while IG Horowitz simply didn’t want to know about it.

Daily Caller reports…

The Intelligence Community Inspector General (ICIG) found an “anomaly on Hillary Clinton’s emails going through their private server, and when they had done the forensic analysis, they found that her emails, every single one except four, over 30,000, were going to an address that was not on the distribution list,” Republican Rep. Louie Gohmert of Texas said during a hearing with FBI official Peter Strzok.

Gohmert continued..

“It was going to an unauthorized source that was a foreign entity unrelated to Russia.”

Strzok admitted to meeting with Ruckner but said he couldn’t remember the “specific” content of their discussion.

“The forensic examination was done by the ICIG and they can document that,” Gohmert said, “but you were given that information and you did nothing with it.”

According to Zerohedge “Mr. Horowitz got a call four times from someone wanting to brief him about this, and he never returned the call,” Gohmert said – and Horowitz wouldn’t return the call.

And while Peter Strzok couldn’t remember the specifics of his meeting with the IG about the giant “foreign entity” bombshell, he texted this to his mistress Lisa Page when the IG discovered the “(C)” classification on several of Clinton’s emails – something the FBI overlooked:

“Holy cow … if the FBI missed this, what else was missed? … Remind me to tell you to flag for Andy [redacted] emails we (actually ICIG) found that have portion marks (C) on a couple of paras. DoJ was Very Concerned about this.”

Via Zerohedge

In November of 2017, IG McCullough – an Obama appointee – revealed to Fox News that he received pushback when he tried to tell former DNI James Clapper about the foreign entity which had Clinton’s emails and other anomalies.

Instead of being embraced for trying to expose an illegal act, seven senators including Dianne Feinstein (D-Ca) wrote a letter accusing him of politicizing the issue.

“It’s absolutely irrelevant whether something is marked classified, it is the character of the information,” he said. Fox News reports…

McCullough said that from that point forward, he received only criticism and an “adversarial posture” from Congress when he tried to rectify the situation.

“I expected to be embraced and protected,” he said, adding that a Hill staffer “chided” him for failing to consider the “political consequences” of the information he was blowing the whistle on.

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Donald Trump plays good cop and bad cop with a weak Theresa May (Video)

The Duran – News in Review – Episode 55.

Alex Christoforou

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US President Donald Trump’s state visit to the UK was momentous, not for its substance, but rather for its sheer entertainment value.

Trump started his trip to the United Kingdom blasting Theresa May for her inability to negotiate a proper Brexit deal with the EU.  Trump ended his visit holding hands with the UK Prime Minister during a press conference where the most ‘special relationship’ between the two allies was once again reaffirmed.

Protests saw giant Trump “baby balloons” fly over London’s city center, as Trump played was his own good cop and bad cop to the UK PM, outside London at the Chequers…often times leaving May’s head spinning.

Even as Trump has left London, he remains front and center in the mind of Theresa May, who has now stated that Trump advised her to “sue” the European Union to resolve the tense negotiations over Brexit.

Trump had mentioned to reporters on Friday at a joint press conference with Theresa May that he had given the British leader a suggestion that she found too “brutal.”

Asked Sunday on the BBC’s Andrew Marr Show what that suggestion was, May: “He told me I should sue the EU. Not go into negotiation, sue them.” May added…

“What the president also said at that press conference was `Don’t walk away. Don’t walk away from the negotiations. Then you’re stuck.”‘

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris summarize what was a state visit like no other, as Trump trolled the UK PM from beginning to end, and left London knowing that he got the better of a weakened British Prime Minister, who may not survive in office past next week.

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Via CNBC

It wasn’t exactly clear what Trump meant. The revelation came after explosive and undiplomatic remarks Trump made this week about May’s leadership — especially her handling of the Brexit negotiations — as he made his first official visit to Britain.

In an interview with The Sun newspaper published Thursday — just as May was hosting Trump at a lavish black-tie dinner — Trump said the British leader’s approach likely “killed” chances of a free-trade deal with the United States. He said he had told May how to conduct Brexit negotiations, “but she didn’t listen to me.”

He also praised May’s rival, Boris Johnson, who quit last week as foreign secretary to protest May’s Brexit plans. Trump claimed Johnson would make a “great prime minister.”

The comments shocked many in Britain — even May’s opponents — and threatened to undermine May’s already fragile hold on power. Her Conservative government is deeply split between supporters of a clean break with the EU and those who want to keep close ties with the bloc, Britain’s biggest trading partner.

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