Olam International, a Singapore-based processor of agricultural products and food ingredients, has entered into a partnership with Russian Dairy Milk Company (Rusmolco), to develop dairy and grains farming in the Penza region of Russia.

Under the partnership, Olam will invest $75m to acquire 75% stake in Rusmolco - which represents the first foreign investment in raw milk production in Russia.

The companies will invest up to $400m in first phase over the next four to five years to expand the area under grains cultivation from the current 52,000 hectares to 106,000 hectares.

In addition, four new modern dairy farms will be established, taking the total milking cow population from the current 3,600 heads to 20,000 heads.

In second phase of the partnership, Olam and Rusmolco envisage further investments, which could include increasing the milking cow population to 50,000 heads to produc 500 million litres of raw milk annually and develop over 130,000 hectares of land under grain farming.

Rusmolco also plans to set up a training and development center aimed at inculcating best practices in international farming and milk production.

According to Olam, up to $320m of the $400m capital spending will be funded by Rusmolco along with some support from the Russian government.

Olam CEO Sunny Verghese said the investment in Rusmolco is another important step towards the implementation of Olam's dairy and grains strategy, which involves selective integration across the value chain with a focus on building end-to-end capabilities.

"Our Russian partner has a deep understanding of the local market and I am confident that this investment is a step forward towards the establishment of a profitable and promising venture for both sides," Verghese added.

Source: Food Business Review

http://dairyproducts.food-business-review.com/news/olam-signs-400m-russian-dairy-and-grain-partnership-310112