Bloomberg News

Billionaire Deripaska Targets China to Expand Russian Food Sales

June 27, 2012

The agricultural division of Russian billionaire Oleg Deripaska’s Basic Element plans to export pork, wheat and soybeans to China to tap into the “explosive” growth in the Asian country.

Basic Element, a diversified group with stakes in everything from energy to aviation, plans to start producing 10,000 to 15,000 metric tons of pork in Siberia to ship to China and other Asian countries, said Andrey Oleynik, managing director of the company’s agribusiness management directorate.

“China is one of the fastest growing consumption markets,” Oleynik said in an interview at Basic Element’s Moscow headquarters on June 15. “The growth is explosive both in terms of food consumption and other products’ consumption. That is why it would be silly not to focus on China.”

The world’s most populous country, with 1.34 billion people according to the World Bank, is importing more food as the available farmland shrinks and people’s diets change with rising incomes. China’s demand grew 41 percent for poultry and 27 percent for pork in the past decade, according to the U.S. Department of Agriculture. The average person in the country ate about 41 percent more pork than his American counterpart last year, Bloomberg Industries estimates show.

Basic Element, whose companies include United Co. Rusal, already does business with China and the move into agricultural trade with the Asian country will be a new development.

Under the company’s agricultural expansion plans, Basic Element has a 2016 sales target of $450 million for produce, up from $259 million now.

Its grain trade is seen growing to 1.5 million tons in 2016 from its target of 500,000 tons this year, Oleynik said, noting that includes trading the company’s own harvest and selling others’ crops as well.

Grain Crop

Basic Element’s grain crop is expected to grow more than threefold to 650,000 tons in four years from 200,000 tons in 2012, Oleynik said. Technological investments will help boost yields and harvests, he said, adding the company founded a bio- laboratory in Krasnodar, which focuses on finding ways to increase wheat yields.

Basic Element’s plans include expanding farming lands to the Amur and Altai regions in Siberia to grow about 100,000 tons of grains there for both the local market and for export to Japan and other Asian Pacific countries, Oleynik said, without giving a specific timeline.

Basic Element also aims to have the capacity to handle 6 million tons of grain a year in the port of Taman and other facilities, he said, without providing a time reference.

The company plans to almost triple its agricultural property to 300,000 hectares (741,316 acres) by 2016, by buying existing farms and undeveloped lands, Oleynik said. Basic Element has about 111,000 hectares of farmland in Krasnodar and Volgograd in southern Russia, in the Mordovia region of Volga, and in the Moscow area.

To contact the reporter on this story: Marina Sysoyeva in Moscow msysoyeva@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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