Russian government fund to build $1bn dairy with foreign investors – update

-updated to add RDIF’s contribution and the size of the dairy.

The Russian Direct Investment Fund (RDIF) has signed a memorandum of understanding with Middle Eastern, Thai and Chinese investors to establish Russia’s largest dairy, in a deal worth about $1 billion.

The new super-sized dairy will work across the supply chain, doing everything from cultivating feed crops to producing finished products.

China’s Banner Infant Dairy Products (Banner Dairy) and Thailand’s biggest agribusiness Charoen Pokphand (CP) joined the consortium, along with several unnamed Middle Eastern parties including banks, according to a press release.

An RDIF spokesman told Agri Investor that the fund also contributed to the investment, adding co-investors are required to at least match investments by RDIF on a dollar-for-dollar basis. Further financial details were not disclosed.

CP is leading management of the site, with support from Banner Dairy.

The dairy will help Russia increase its domestic output and reduce milk imports, RDIF’s chief executive officer Kirill Dmitriev said in a statement. Russia banned dairy imports from Europe and the US following Ukraine crisis sanctions.

“Russia is one of the world’s largest milk producers … however, its production processes are not very efficient,” Dmitriev said. “Through the use of modern dairy technologies, cows in some countries produce almost two and a half times more milk than in Russia.”

The site’s dairy products will also be exported to Asia, RDIF’s spokesman confirmed.

Chinese companies in particular have been building up access to dairy production abroad, focusing on supply chains into Asia. Recent high-profile investments include Moon Lake’s purchase of Australia’s largest dairy Van Diemen’s Land. Shanghai Pengxin also owns a string of dairy farms in New Zealand.

Modern technology in the Russian production site will mean milk can be processed from cow to bottle in two hours. To be built in the Ryazan region, the complex will be capable of producing up to 400,000 tonnes of finished products a year, including cheese and sour-milk products, according to the RDIF.

It will house 80,000 dairy cows in a 1,000-hectare site, with an additional 50,000 hectares dedicated to crop cultivation, the spokesman said.

“[CP and Banner Dairy’s] participation in the construction and the operational control of the complex will significantly enhance its effectiveness, which will mark an important step towards increasing the share of domestic dairy production and reducing milk imports,” said Dmitriev.

RDIF is a $10 billion vehicle backed by the government. It was established in 2011 and has a mandate to catalyse the Russian economy with its investments.