Kebab Fans Should Come to the Rescue: Idavang Kicks off Construction of Pig Farm in Leningrad Region with ₽3.7 Billion Price Tag
June 18, 2018
This week Idavang Group will begin construction of a pig farm in Leningrad Region with a ₽3.7 billion price tag. The new facility will help the company increase pork production by thirty percent.
The new facility is designed to accommodate 55,000 pigs at any one time and produce 12,000 tons of pork live weight. The facility will include twenty-six hog houses, a feed production unit, a feed warehouse, and other buildings. Seven of the hog houses will be put into operation next years, and the facility will achieve its full capacity by 2024. The project’s overall price tag is ₽3.7 billion [approx. €50.3 million]. The payback period is fifteen years.
As sources at Idavang Group explained to us, the project became possible after the Russian Agriculture Ministry approved a subsidy for paying interest on the loan the company planned to take to build the facility. The ₽1.6 billion loan was disbursed in April.
Late last year, Idavang floated €85 million of priority secured bonds on European financial markets. Part of the proceeds from sales of the bonds could be used on building the facility, which will be in the Luga District.
Idavang Group is a subsidiary of Idavang A/S, a Danish company that owns pig farms in Russia and Latvia. The company has a pig farm in Leningrad Region’s Tosno District that produces 20,000 tons of pork annually, as well as a farm in Pskov Region that produces 10,000 tons of pork per year.
Excessively Cheap Meat
Market insiders say that circumstances are not favorable for expanding production.
“We’ve been seeing a glut of pork on the market, and only the major companies, which have their own feed supply, have been doing well,” says Andrei Krylov, director general of Dawn Plus LLC.
According to Mr. Krylov, players planning to expand expect they can oust small producers who do not have their feed production facilities from the market. For example, Pulkovo Agroholding, which does not have its own feed supply, has now filed for bankruptcy.
“We have been stepping up the production of feed. We have 3,500 hectares in Oryol Region and 1,000 hectares in Kaluga Region where we grow grain. In addition, last year we launched a feed production facility in Kaluga Region,” Mr. Krylov adds.
Other experts also say the market is glutted. Last year, Russia produced 3.3 million tons of pork. Domestic companies meet only 97% of the total demand for pork, says Lyubov Burdiyenko, an analyst at Emeat Information and Analysis Agency.
According to Ms. Burdiyenko, pork prices began to rise in April after a decline at the beginning of the year. The price rise was due to the onset of the summer cottage and kebab cookout season.
However, wholesale prices in April were ₽168 [approx. €2.30] a kilo on the half carcass. This is three percent lower than in April 2016. Producers have been operating on the verge of profitability, the analysts note.
Translated by the Russian Reader. This post is dedicated to my father, a retired pig farmer, on the occasion of yesterday’s Father’s Day holiday. He taught me everything I know about pigs and farming, and many, many other things as well. Photo courtesy of Fermok.Ru.