However, the prospects for the project remain unclear as Miratorg’s management has pointed to negative market conditions in the country.
“The company is considering doubling its production capacity in the pork sector, but has not yet launched any new projects as there is lack of clarity over future state support for the industry,” said Kotenko.
“A project for 4 million head of pig per year could be implemented in Kursk Oblast. Right now, we are assessing the project, preparing documentation and negotiating with the banks.”
In the next four years the company plans to develop a pig abattoir and processing plant with a production capacity of 350,000 tonnes of pork per year, as well as 60 pig farms and four huge feed mills with an overall capacity of 1.5 million tonnes of feed. The project would require more than160,000 haof land for growing the feed crops.
“We have not yet started the project, as there is no clarity on how state support for agriculture will develop in the next few years,” explained Kotenko.
Meanwhile, Russian experts admit that the current economic investment climate for producing pork is getting worse.
“There is no confidence from investors that projects for pork production already launched will be really successful. This is connected to general problems in the country’s economy, as well as the fact that the country is getting closer to self-sufficiency in pork, without any success in increasing pork exports,” commented Russian agricultural analyst Eugene Gerden.
“In general, the investment climate in the industry is low right now because of the risks associated with unfavourable general economic growth, the volatility of exchange rates and reduced access to finances. High interest rates on loans are also hampering investments in agriculture,” said Oksana Krupnova, a partner at the local office of Ernst & Young, adding that the issue of state support was also crucial.
“Theoretically, [state] subsidies are a good incentive for investors, but in practice, the delay in payments can reach up to three to six months or more, which increases the burden on agricultural loans,” she explained.
“This is a major problem, and there are fears that, in the near future, it will get worse,” added Kotenko. “The uncertainty over the terms of [subsidy] payments is constraining not only us, but also many other investors.
“One of the possible factors to improve the investment climate in agriculture would be more active steps [by the state] to increase export potential.”