Rusagro goes the whole hog in Chelyabinsk

Russian agricultural producer, Rusagro, will invest 20 billion roubles in a new pig breeding complex in Chelyabinsk region.

The agreement was signed on Monday in Moscow by Chelyabinsk region Governor Mikhail Yurevich and Rusagro Group CEO Maxim Basov, with the regional administration adding it will provide a significant regional boost.

“For the region it means construction of the new technologically super modern production, new work positions (more than a thousand), development of infrastructure and the economics of rural territories of the Chelyabinsk region, provided the competitive selection of the investment project progresses properly.”

The Chelyabinsk region is aiming to increase domestic pork production to 500,000 tons a year, which compares to 300,000 tons produced in 2010, and replace imports.

Tatyana Bobrovskaya, a senior analyst at IFC Metropol, says the move is a part of a expansionary trend by Russian meat producers, and accords with the governments plans to reduce reliance on imports.

“Such big Russian agricultural companies as Cherkizovo or Prodo, for example, have been increasing their capacity for at least 3 years already. Russia’s meat industry is really interesting and attractive, as government now strongly supports it to implement its plan to substitute imports. And Russia’s meat sector is one of the most import dependent ones, with about 35% of meat products being brought from abroad. The pork segment in turn is the most competitive.”

Meat industry is also highly profitable, providing for about 35 – 45% of EBITDA margin, adds Bobrovskaya, with big players now having more competitive advantage in Russia after the summer drought.

“Some smaller companies left the market after grain prices were up in summer 2010, which gave bigger ones additional opportunity to expand in the market.”