Agricultural investment has gained an increasing scope recently, and in view of the latest developments on the world economic scene, it is unlikely to subside for decades. Food importing countries with land and water constraints – including Saudi Arabia, the Emirates, South Korea, China, India, Libya and Egypt among others - are at the forefront of new investments into agricultural land. The growing number of overseas deals with land has led to higher competition; farmland prices have risen throughout the world in recent years.
The largest Russian grain processor PAVA together with its agricultural subsidiary, an owner and developer of agricultural land in Russia, called ’Russian Agricultural Division’ (RAD, www.radcorp.ru) is keeping the situation in perspective, and consolidates vast tracts of the country’s agricultural land. RAD was established in 2008 to acquire agricultural land assets in Russia with the intention of becoming a large-scale producer of high-value added agricultural feedstock including wheat, barley, rye, sunflower seeds, buckwheat and peas for foreign and domestic market supplies.
"Abundant farmlands in Russia provide a unique investment opportunity; besides, land in Russia is still an underestimated asset. For instance, in the USA the average price per 1 ha stands at $10,000 - $30,000, while in Russia the figures are much lower, sometimes reaching the level of $250 per ha. Clearly, the potential is very strong", says Galina Balaenkova, PAVA Head of IR and International Business Development Department. "With double impact of the financial and food crises, agricultural land has now become a strategic asset for our company", Ms Balaenkova continues. "This is prompted by unstable crop prices and aggravated by the biofuels boom – while the UN sees the increasing number of starving and malnourished population. Large agribusinesses have the key role in contributing to world food safety, possessing the right tools for making the investment work efficiently".
Russian Agricultural Division aims to acquire and cultivate agricultural land by introducing modern equipment and management; moreover the Company intends to increase the productivity of the land, generate cash flows and create value by land value appreciation.
RAD presently controls over 160,000 ha of land in different regions of Russia, and envisages to increase this amount to at least 500,000 ha by end-2010. As of today, RAD is controlled by PAVA who is willing to cede up to 40% of its control through a share issue in a Private Placement transaction. Investors, both Russian and foreign, are interested to invest millions of dollars into Russian land to help bring around the long-neglected farmland amid of food crisis.
"Our aim is to create mutual benefits. PAVA is also implementing an advanced wheat grain processing project, which would enable us not only to increase world supplies of prime-quality agricultural produce and high value-added ingredients, but also to promote the development of national economy ", adds Ms Balaenkova.