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 Cargill expands vegetable oil market in Russia

1/26/2005 - Food ingredients behemoth Cargill drives into growing Russianvegetable oil market, breaking ground on its first refinery in thecountry.

Sunflower, rapeseed and corn oil, as well as palm and coconut oil, willall pass through the new €46.1 million facility expected to be up andrunning by February next year.

The move indicates a clear desire from Cargill, the largest US privatecompany, to expand its reach in the number one vegetable oil market forthe Central and Eastern European region.

"By locating our oil refinery at Efremov we will capitalise on theexisting infrastructure, employees and good working relationship with theTula Oblast," says Dominique Le Doeuil, manager of Cargill’s starches andsweeteners business in Russia.

The refinery is the latest addition to Cargill's Efremov complex inRussia, where the company has been producing glucose and starch for nearlyten years. A new facility producing sweeteners from wheat and a malt plantare also under construction. Both are scheduled to start in autumn 2005.

Today, soybean and palm oil combined account for over half of all oilconsumed in the world.

After tight crops in 2003, soy oil has come in at 35 million tons for2004, offering some relief to prices, that in 2003, hit 15 year highs.Today, soy oil is selling for about $470 (€359) a ton.

Food makers are currently enjoying bearish prices for palm oil usedextensively in food applications, currently trading at about $340 (€260).

The third largest vegetable oil crop, rape seed oil, reached 15 milliontons and is now priced at about $666 (€509) a ton.

The fourth largest vegetable oil crop, sunflower seed oil, reflects asimilar picture to rape see oil, with prices becoming bullish on a tighterbalance sheet. For 2004, world production reached 10 million tons. Pricesare currently trading at around the $690 (€527) mark.

Cargill said products to come out of its new refinery will targetapplications such as margarines, spreads, ready meals, bakery,confectionery and potato crisps.

"Once production in the oil refinery is underway, we will produce a rangeof liquid oils for the Russian market under the Cargill "Sunny Gold" brandand supply Russian own label and food service customers," said Rob Hansen,manager of Cargill’s oil refinery project in Russia.

Cargill announced in December that it will increase its stake in theRomanian edible oils market with the acquisition of the local company OlpoPodari.

Cargill already controls around 10 per cent of Romania’s silo capacityafter the acquisition of Comcereal earlier this year gave it acomprehensive network of grain storage facilities in the Romanian grainbelt in the Teleorman, Giurgiu, Ialomita and Galati regions. Theacquisition of Olpo Podari allows it to move into the local market foroilseed crushing and refining.

Olpo is currently completing construction of a new crushing line that willincrease the factory's processing capacity to about 1,200 tons per day,making it the one of the largest oil factories in south-east Europe. Olpocan currently process up to 600 tons of seeds daily, the vast majority ofwhich are sunflower seeds. Most of the oilseeds are sourced locally.

The Romanian edible oil market is the third largest in the CEE regionafter Russia and Ukraine.

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