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Russian pork producer nears commitment despite Ukraine impact

A Canadian investor is still in due diligence although investors from Europe and the US stopped the process earlier this year.

Russian Farmland Partners, a pork producer, is currently talking to investors about raising $38 million in equity capital to establish a vertically-integrated meat production company.

The firm has struggled to maintain momentum with some investors in the wake of the Ukrainian crisis over the summer, although one Canadian private investor is close to committing around $15 million, according to Alexey Savraksin, the chief executive.

“The Ukraine crisis has made it very difficult to attract Western investors despite prior interest from them. But I am still working on getting the project going and speaking to investors in China and other countries,” Savraksin told Agri Investor.

The project is seeking $190 million in total but can get debt financing for the remainder, he said.

The company was in talks with investors from Europe and the US, which were starting to do due diligence on the project earlier this year.  But the Ukrainian crisis and the ensuing economic sanctions imposed on Russia by the US and European Union halted these talks, according to Savraksin. “They are now waiting for the right time to reconsider,” he said.

A range of Russian and Chinese investors, from private capital to institutions, are also considering committing capital to the project alongside the Canadian investor. Commitments will be made in return for shares in the company.

The capital will go towards establishing breeding pig farms, growing grain for pig feed, constructing pork processing facilities and ultimately producing chilled pork meat. The project might also produce sheep and beef at a later stage.

Production of fresh chilled meat to European standards is rare in Russia and only 8 percent to 10 percent of the country’s slaughter houses are able to reach these standards, according to Savraskin. Official data states the shortage of pork products in Russia is between 700,000 tons and 1 million tons annually but Savraskin estimates that the shortage is significantly more than the official figures. Furthermore, Russia imports nearly 40 percent percent of all pork consumed.

“These dynamics make the Russian market, and the pork sector, particularly attractive,” he said.