Agri land prices in Russia set to rise after $26m China deal

The price of agricultural land in Russia is set to rise following the signing of a land-lease deal by a Chinese company which puts a price of 250 rubles per hectare on land, well above the average 182 rubles per hectare, according to an investor in the country.

“It’s about time land in Russia got more expensive,” Erik Danemar, chief financial officer at Black Earth Farming, an owner and operator of agricultural farmland in Russia, told Agri Investor. “Agricultural land on average is around 182 dollars a hectare in Russia, compared with 5,000 euros in Poland. Russia is turning its eyes to the east for its long-term food supply, and (as investors) we are happy to see the agricultural sector being prioritised by the government.”

Chinese company Zoje Resources Investment has signed an agreement to lease 115,000 hectares of farmland in the east of the country for 49 years. The firm will pay 250 rubles per hectare per year, valuing the deal at $26 million over the lease period, according to Russia’s official news agency. The deal could ultimately lead to investment of $450 million in local agribusiness development, with the investor converting land to support grain growing as well as meat and dairy production.

The deal is the latest in a string of announcements which has seen the Russian government look to boost investment in agriculture following the ban on food imports from the west introduced in the wake of the Ukraine crisis.

In June the state-run Russian Direct Investment Fund (RDIF) and the Russia-China Investment Fund (RCIF), a private equity fund created by RDIF and China’s sovereign wealth fund China Investment Corporation, announced they had established a $2bn fund for investment in agricultural land. The fund is seeking commitments from institutional investors. At the same time the two countries also announced they would create an experimental free trade zone for agricultural products.

And last month RDIF announced a partnership with Saudi Arabia which will see the country’s sovereign wealth fund invest $10 billion over the next five years in Russia agriculture and infrastructure, among other industries.

Last year RDIF intensified its focus on agribusiness after investing a third of its $10 billion portfolio into infrastructure. RDIF is focused on improving harvest yields in the country through technology and better farming practices, Sean Glodek, director at RDIF, told Agri Investor in June last year.

The latest deal has led to protests by locals concerned at the prospect of China owning the rights to the land. To reassure locals, the company said in a statement that no fewer than 75 percent of jobs created through the deal would go to locals.