When you meet an agricultural equipment dealer from Winkler, Manitoba, the last thing you expect to hear from them is “I’m an expert in Kazakhstan agriculture.” This is the story of CanAgro Exports Inc., a small agricultural equipment supplier who has tapped into a growing market half way around the world that fits their prairie expertise.
Glen and Sheila Kehler started their business selling agricultural equipment in southern Manitoba in 1984. As the market for farming equipment in Canada can be very saturated, they saw an opportunity to expand their business by selling to foreign markets. They began exporting agricultural equipment in 2003. It wasn’t long before the business became a part of the family as their two children Justin and Melissa joined after university. At first the Kehlers were drawn to Russia because of the similarity in terrain. It wasn’t long however before a new opportunity presented itself.
“We sold a shipment of equipment to Russia, and we were told by our Russian customer that they had sold one of the tractors to a customer across the border in Kazakhstan,” says Melissa Vencatasamy, Finance Manager, CanAgro Exports. “Dad saw an opportunity, and he went for it.”
Kazakhstan’s agricultural potential
“Just like Christopher Columbus, my father discovered a ‘New World’—almost by accident,” Vencatasamy explains. The Kazakh market represented a huge potential for Canadian agriculture expertise, one that was still largely a mystery.
Kazakhstan is the sixth largest wheat producer in the world, and almost 70 per cent of its land is occupied in crops and animal husbandry. Kazakhstan is also the ninth largest country in the world, which means the farmlands can be huge. And while the terrain may be similar, the land is managed very differently than in Canada.
“In Kazakhstan a single farm can be as large as all the farms in southern Manitoba combined” says Vencatasamy. “They’re also owned and managed by companies or government bodies, so it’s very different than working with a local farmer.” Fields in Kazakhstan are so large that it can take over three hours to travel from one end to the other…by tractor that is.
Recognizing the potential benefits to the country’s GDP, the Government of Kazakhstan has made agribusiness development a priority. Their aim is to increase agri-food exports by 20 per cent by the year 2020. Furthermore, the developing agriculture sector in Kazakhstan is beginning to adopt more Western production practices, increasing demand for high-quality North American equipment.
Understanding your clients
After working in Kazakhstan for more than a decade, the team at CanAgro have become experts at managing the unique properties of the market. This includes understanding their clientele, and tailoring their products to fit their needs.
For example, shipping to Kazakhstan can be a challenge. It can take up to six months for some Canadian suppliers to fulfil their orders. This means CanAgro must keep carefully planned orders of inventory, and be ready to ship spare parts quickly if equipment breaks or wears down.
To manage liquidity risks while continuing to expand, CanAgro has relied on financing and insurance for them and their clients. “Regional banks in Kazakhstan see inventory as a big risk for our clients. Having partners that can support them with guarantees has given us a great competitive advantage,” says Vencatasamy.
“We first used the financial services of Export Development Canada (EDC) in 2008, right before the recession hit,” says Vencatasamy. “The financing helped us secure a $10 million sale in a tough economic time. That was huge for our business.”
CanAgro has used EDC’s Export Guarantee Product (EGP) to ensure payment on their shipments, as well as financing for expansion of their business.
“CanAgro has realised a great opportunity in a developing market,” said EDC Senior Account Manager, Ralf Miner. “Entering a market like Kazakhstan can be a big risk for a small business. Having an export guarantee on their shipments, as well as financing to grow in the market, can bring a lot of peace of mind,” he explains. “EDC is thrilled to see this small business continue to grow. I’m looking forward to seeing what the future brings for them.”
Manufacturing exports in Manitoba are set to grow by 16 per cent in 2015. At this rate, it won’t be too long before the CanAgro story becomes routine.
For more information about Manitoba’s export potential read EDC Global Export Forecast.