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Large Chinese holding will invest almost 10 billion rubles in Russian agriculture

The Chinese company Joyvio Beidahuang Agricultural Holdings (JBA) will invest almost 10 billion rubles in Russian agriculture. Aleksey Chekunkov, CEO at the Far East Development Fund (FEDF, member of the VEB. RF), reported to Vedomosti newspaper about JBA’s intention to enter the agricultural market in Primorye. The information was confirmed by Dmitry Savenkov, head of Legendagro Primorye, one of the Russian affiliates of the Chinese company. At the end of 2018, JBA established Legendagro Holding JSC, which is confirmed by the USRLE data.

According to it, JBA is a joint venture of the agricultural subdivision of the Chinese investment holding company Legend Holdings – Joyvio Group, one of the China’s largest agricultural groups Beidahuang (its land bank exceeds 6 million hectares) and the Chinese state-owned company Jiusan Grain and Oil Industry Group specializing in processing soybeans.

In Primorye, there are favourable climatic conditions for cultivation of grain crops and legumes; they are similar in many respects to the climate of the China border regions. Chinese technologies allow to cultivate land efficiently, comments on the region choice Zhen Jiang Chao, CEO at JBA. Besides, local authorities and the Ministry for Development of Russian Far East provide necessary support. “Thus, the project has great potential,” he concluded.

Legendagro has already leased 3,500 hectares of agricultural land in the Khorolsky district of the Primorye Territory, where it cultivates rice, soybeans, and corn, reported Savenkov. In the future, the company intends to increase the land bank in the Territory up to 50,000 hectares and build a plant for deep processing of soybean with a capacity of up to 240,000 tons per year. Soy concentrate, soybean oil, lecithin, and molasses will be produced there. The main consumers of these products are expected to be Asian producers of feed for farm animals, fish, and pets. The business is export-oriented – the company will export grain and plant products to China, South Korea, Japan, etc., noted Savenkov. Therefore, the agricultural holding is also planning to purchase a fleet of grain trucks and organize a port terminal for the export of agricultural products. It makes sense to build such an enterprise with export orientation – the population of the Far East is relatively small, about 8 million people, and there are major Asian importers nearby, agrees Andrei Sizov, Director at Sovekon Analytical Center.

Investments in the project are 9.7 billion rubles, of which up to 2 billion rubles will be invested by the FEDF. The Fund and JBA signed a corresponding agreement at the St. Petersburg International Economic Forum. Following the deal, the Fund will further receive a minority stake in Legendagro Agricultural Holding, Savenkov noted.

Many Chinese entrepreneurs who rent land in the Far East – mainly in the Amur Region, Khabarovsk Territory, Primorye – cultivate soybeans, corn, says Vladislav Novoselov, COO at BEFL Consulting Company. Russia has more free land and it is much cheaper than in China, he explained. As a rule, these are small Chinese entrepreneurs from provinces close to Russia; there are no major agricultural holdings among them, Sizov said. Chinese employees work at such enterprises, and Chinese equipment is used, and most of their products are sold to China.

Instead, major agricultural holdings from other Asian countries have long been investing in Russian agriculture, recalled Sizov. So, the Vietnamese TH Group is already constructing dairy farms in the Moscow and Kaluga Regions, Olam International from Singapore holds a controlling stake in Rusmolco, major milk producer, said the expert.

50,000 hectares is a large-scale agricultural bank for Primorye, says Sizov: the current leader in land plots in the region is the Rusagro Group owned by Vadim Moshkovich with 96,000 hectares (according to the company's report for 2018).