Soaring food prices are turning Russia’s former Soviet farming collectives into modern capitalist havens, says Irwin Greenstein, writing for Contrarian Profits.

One company called Black Earth Farming (STO:BEFSDB) is leading the charge into millions of acres of prime Russian farmland left fallow after the collapse of the Soviet Union.

Black Earth Farming is part of a movement by hedge funds, portfolio managers and Russian insiders to capitalize on the worldwide boom in food. This is a great long-term opportunity for foreign-equity investors.

Approximately 7% of all arable land on the planet is owned either by the Russian state or by collective farms. Of that, roughly 35 million pristine hectares lies uncultivated. (A hectare is about two and a half acres.) To put that into perspective, Britain has 6 million hectares of cultivatable land.

The land under till coughs up tiny yields due to poor work ethics and antiquated technology. The average Russian grain yield is 1.85 tons a hectare – compared with 6.36 tons a hectare in the U.S.

The enormous agricultural potential of Russia’s farmland has caused prices to double in the last two years. The average price a hectare was $570 in 2006 and is now $1,000.

A pioneer in Russia’s new farming movement has been Black Earth Farming, with offices in the Channel Islands and Moscow. The company is listed on the OMX Nordic Exchange and trades in Swedish Depository Receipts (SDRs). Obviously, this company isn’t for casual traders, but those people willing to withstand the hassle can catch the rare find on the rebound.

The company has been acquiring and developing farmland and assets in the Black Earth Region in Russia – one of the most fertile regions anywhere. This land languished for decades under the Soviet regime and the decades that followed its collapse.

A new system of land titles was established under government reforms called the Russian Land Code. Investors who got in early managed to grab the immediate appreciation from the recent demand for agricultural products.

Because of its early entry, Black Earth Farming gained a strong position in several Russian regions, in particular the richly endowed with black earth soil. As of 30 June 2008, Black Earth Farming had 331,000 hectares of land under its control. This year Black Earth Farming says it plans to harvest about 143,600 hectares.

In its harvest progress report of August 19, 2008, the company reported that it had concluded harvesting slightly more than 52% of the total planted area. Despite the fact that as much as 40% of the fields were previously fallow, Black Earth Farming said, “the yields for the harvested area have so far been satisfactory.”

The average gross yield for winter wheat stood at 4.4 tons per hectare, with 80% of the crop already harvested. While its barley crop came in at 3.3 tons per hectare, the company’s rape culture suffered from winterkill and the yield was quite small. The total harvest for this year will run through late September, early October.

Black Earth Farming went public right after Christmas 2007. The offering was over-subscribed. Its current 52-week range is $81.75 down to $28.00. With the IPO froth subsided, the current prices indicate a potential long-term opportunity for investors with a penchant for foreign equities.

It’s quite possible that the price hit bottom on August 27, at $25.60. As of this writing, it’s trading at $27.30. Keep an eye on this stock to see if the rise is a blip or a trend.

P.S. In yesterday’s Daily Reckoning, Bill Bonner said Russia “could not only be one of the world’s greatest energy exporters, it could also be one of the world’s leading exporters of food.” He also said Russia’s transformation into a food-producing giant could seriously threaten the US agriculture sector. Investors should adjust their portfolios accordingly.