Pork investment chances in Eastern Europe

There are plenty of investment opportunities in Russia, Ukraine, Romania and Hungary in all parts of the pork supply chain concludes a new report from the Dutch Agricultural Economic Institute LEI.

There is still a lot of progress to be made in these countries in the field of management, knowledge and knowledge intensive products, such as premixes, breeding stock, housing technology and underlying knowledge.

LEI conducted a study in Russia, Ukraine, Romania and Hungary on behalf of the Dutch Ministry of Agriculture and with support from feed maker Cehave Landbouwbelang.

Cehave Landbouwbelang is already active in these countries and intends to expand its foreign business. "Now we achieve about one third of our turnover in foreign countries," said CEO Kees Sijssens. "For 2010 we aim at 45%".

Opportunities in Romania
Total production of compound feed for pigs in Romania amounts to 0.7 million tonnes. The rest of the feed needed is produced on-farm in some cases supplemented with concentrates and premixes.

Concentrates and premixes are imported, as is soy. Romania is self-sufficient for wheat, maize and sunflowers. There appears to be a scope for investors in the feed industry for supplying large farms with high quality complete feed.

If use can be made of an existing distribution structure, feed can also be supplied to backyard farmers, which take the majority of Romanian pig farming business.

Ukraine, great potential
Ukrainian agriculture has great potential for cultivating raw materials. Livestock population is growing, as is the demand for animal feed.

In 2005 some 2.8 million tonnes of compound feed were produced, of which 0.6 million tonnes only for pigs.

Investors in modern feed technology can supply to agro-industrial complexes that lack the required expertise themselves.

The use of complete feed is not customary on smaller farms. Some of these farms however do use premixes and concentrates.

Russia most doubtful
Investment in single parts of the supply chain may involve major risks. In Russia, there is a precondition that a complete chain be set up for breeding stock and own feed production up to and including meat processing.

Particularly applicable to Russia is the fact that investment is only possible when done jointly with local investors. Opportunities must actually be sought in supplying through local distributors.

In the other countries investigated it is possible to set up a business of your own, but beware of ownership of properties, which is not always clear.

Use existing businesses
In view of lengthy permit procedures for setting up completely new business, it is recommended that existing businesses (e.g. former state-owned properties or farms) are taken as the basis and modernised.

This also provides the opportunity to explore the local market and to create support among the local population.

Investment in a partial interest in existing businesses is recommended, certainly when entering unfamiliar markets. Partial investments limit risks and provides access to local networks.