Russian meat giant builds soybean crushing plant to improve costs

By Vladislav Vorotnikov

- Last updated on GMT

The construction of the soybean plant is expected to begin in 2019
The construction of the soybean plant is expected to begin in 2019
Russia’s largest meat producer, agricultural holding Cherkizovo, has revealed plans to build a major soybean crushing plant in the European region of the country, with the aim of achieving better production costs by optimising feeding practices.

Cherkizovo intended to build the plant in the EletsProm special economy zone in Lipetsk Oblast, Natalia Novopashina, official spokesperson for Cherkizovo, told GlobalMeatNews​. The construction has been slated to begin in 2019 and the plant is scheduled to start operating in 2020, she added. It would produce both soybean meal and oil.

Mikhail Maltsev, executive director of the Russian Union of Oils and Fats, told Russian newspaper Agroinvestor ​that, via this new project, Cherkizovo hoped to use more soybean meal and oil in feeding. Maltsev added that the company might also be planning to increase its soybean harvest and produce soybean with a higher protein content.

This could secure the company a strong competitive advantage in Russia’s meat industry in terms of production costs, said Maltsev.

Novopashina declined to comment on how much the company could reduce production costs by using more soybeans in animal feed.

Russia’s feed industry has an acute shortage of soybeans, as the demand in the feed industry alone exceeds overall domestic production by nearly twofold, Valery Afanasiev, president of the Russian Union of Feed Producers, told GlobalMeatNews​.

Soybeans in demand

Moreover, most soybeans in Russia are produced in the Far Eastern federal district, far away from the main consuming regions. Historically, Russia’s feed industry has relied on wheat and barley, whereas by using more soybeans, companies could optimise their production costs, Afanasiev estimated.

Russia produced 3.7 million tonnes of soybean in 2017 over an area of 2.6 million hectares (ha), according to estimates from the country’s Ministry of Agriculture. In the next few years, the country planned to expand the area of land used for soybean production to 5 million ha, forecast Alexander Tkachev, former Russian Minister of Agriculture.

In 2017/18, Russia imported 2.2 million tonnes of soybeans, primarily from South America, and this figure had not changed on the previous season, the Ministry estimated. Soybeans accounted for 58% of overall feed imports into Russia, the Ministry added. 

Soaring margins

Meanwhile, Cherkizovo’s profit margins have grown markedly in 2018, the company reported in a statement on its website on 15 November. In the first nine months of the year, Cherkizovo generated a net profit of RUB10.4bn ($180m), 80% up on the same period the previous year. Net revenue also increased by 7% year-on-year to RUB70.1bn ($1.1bn).

Sergey Mikhailov, general director of Cherkizovo, said in the statement that the company had taken advantage of vertical integration. He added that the average price for meat on the domestic market hit record lows in early 2018, but had started to rise after the second quarter of the year and this had significantly improved operational profitability for the company.

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