Sunflower, rapeseed and corn oil, as well as palm and coconut oil, will all pass through the new €46.1 million facility expected to be up and running by February next year.
The move indicates a clear desire from Cargill, the largest US private company, to expand its reach in the number one vegetable oil market for the Central and Eastern European region.
"By locating our oil refinery at Efremov we will capitalise on the existing infrastructure, employees and good working relationship with the Tula Oblast," says Dominique Le Doeuil, manager of Cargill's starches and sweeteners business in Russia.
The refinery is the latest addition to Cargill's Efremov complex in Russia, where the company has been producing glucose and starch for nearly ten years. A new facility producing sweeteners from wheat and a malt plant are also under construction. Both are scheduled to start in autumn 2005.
Today, soybean and palm oil combined account for over half of all oil consumed in the world.
After tight crops in 2003, soy oil has come in at 35 million tons for 2004, offering some relief to prices, that in 2003, hit 15 year highs. Today, soy oil is selling for about $470 (€359) a ton.
Food makers are currently enjoying bearish prices for palm oil used extensively in food applications, currently trading at about $340 (€260).
The third largest vegetable oil crop, rape seed oil, reached 15 million tons and is now priced at about $666 (€509) a ton.
The fourth largest vegetable oil crop, sunflower seed oil, reflects a similar picture to rape see oil, with prices becoming bullish on a tighter balance sheet. For 2004, world production reached 10 million tons. Prices are currently trading at around the $690 (€527) mark.
Cargill said products to come out of its new refinery will target applications such as margarines, spreads, ready meals, bakery, confectionery and potato crisps.
"Once production in the oil refinery is underway, we will produce a range of liquid oils for the Russian market under the Cargill "Sunny Gold" brand and supply Russian own label and food service customers," said Rob Hansen, manager of Cargill's oil refinery project in Russia.
Cargill announced in December that it will increase its stake in the Romanian edible oils market with the acquisition of the local company Olpo Podari.
Cargill already controls around 10 per cent of Romania's silo capacity after the acquisition of Comcereal earlier this year gave it a comprehensive network of grain storage facilities in the Romanian grain belt in the Teleorman, Giurgiu, Ialomita and Galati regions. The acquisition of Olpo Podari allows it to move into the local market for oilseed crushing and refining.
Olpo is currently completing construction of a new crushing line that will increase the factory's processing capacity to about 1,200 tons per day, making it the one of the largest oil factories in south-east Europe. Olpo can currently process up to 600 tons of seeds daily, the vast majority of which are sunflower seeds. Most of the oilseeds are sourced locally.
The Romanian edible oil market is the third largest in the CEE region after Russia and Ukraine.