It has announced a "partnership" with the Russian Dairy Company (Rusmolco) which sees an initial investment by Olam of up to $US75m for 75% of Rusmolco's equity.
Olam, which owns at least 80% of New Zealand Farming Systems Uruguay and has a 25% share of Open Country Dairy, says it aims to have a 20,000-cow milking herd and 106,000ha grains operation started in four-five years.
This "first phase" of expansion of Rusmolco's 3600 cows and 52,000ha is expected to cost up to $US400. Phase two is to double the scale in three-four years, taking the herd to 50,000 producing 500 million L/year with 130,000ha of grain production.
Such expansion would make the partnership the leading milk producer in Russia and put it in the top 10 private milk producers globally, says Olam.
"The investment in Rusmolco is another step in implementing Olam's dairy and grains strategy of selective integration across the value chain with end-to-end capabilities," chief executive Sunny Verghese said January 30 when the deal was announced.
"Rusmolco has a strong dairy platform and 106,000ha suitable for agriculture, an attractive platform and asset base hard to replicate in a short time. Our Russian partner has a deep understanding of the local market and I am confident that this investment is a step toward a profitable and promising venture."
Naum Babaev, founder and chairman of Rusmolco, sees "enormous potential in partnering with Olam in this venture."
"Olam's financial resources, management and experience of operating in 65 countries create a platform for development of our business. Together we hope to achieve a dominant position in the industrial milk segment globally."
The chairman of Russia's National Dairy Producers Union, Andrey Danilenko, says Olam's partnership with Rusmolco is unprecedented in the Russian dairy industry.
"The investment by a global leader such as Olam is proof agriculture production is becoming one of the most attractive sectors in the global economy in which Russia can be a large and important contributor."
Olam has been in Russia since 1993 and says it is one of the most attractive markets for dairy farming today because of its high domestic demand and consequent large and growing demand-supply gap. Competitively priced fertile land makes for low feed costs and the Russian government increasingly supports private investment in local dairy productivity and output.
Rusmolco was formed in 2007 and has nine livestock farms in seven areas of Penza region, specialising in dairying and cropping.
It employs 900 people and claims to be "the largest and most promising raw milk producer in the region."
