Opportunities to invest in Eastern Europe

11-01-2008 | |
Opportunities to invest 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 product, 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
selfsufficient 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
Ukranian 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
limits risks and provides access to local networks.

Related links:
LEI
Cehave

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