Cargill, MV Cargo Finalize Deal for $100M Grain Terminal in Ukraine

Through an agreement signed with Ukraine-based MV Cargo on February 24, Cargill has announced a $100 million investment for the construction of a grain terminal at the Black Sea port of Yuzhny.

The finalization of the plans follows a memorandum of cooperation forged between Cargill, MV Cargo, and Ukraine’s Sea Ports Authority (USPA) signed on August 13, 2015 under which the port authority agreed to dredge the surrounding area around the site for the terminal to 16 meters, enabling the site to handle larger vessels with a deadweight up to 100,000 tons.

Foreign investors have been reluctant to commit to Ukrainian projects due to the ongoing tensions with Russia and pro-Russian separatists in the eastern region of the country, but the BBC reports that Ukrainian Prime Minister, Arseniy Yatsenyuk sees this investment as a signal to other investors that Ukraine is a “truly reliable and good place for making investments.”

“Through this investment Ukraine’s port infrastructure will be expanded and will provide greater efficiencies to connect Ukraine’s surplus agricultural crops with the parts of the world demanding more food said Andreas Rickmers, head of Cargill’s grains and oilseeds business in Europe in a company statement. “This new port will benefit Ukrainian farmers, the overall economy and global food security. It will add to our footprint of port facilities in the Black Sea region and confirms our intention to keep investing in Ukraine’s agricultural sector.”

Currently, Ukraine is shipping approximately 35 million tons of grain from its ports and is expected to ship a record 37 million tons this season. However, Reuters reports that the government is targeting the doubling of its export capacity within the next five years. This terminal will enable the exportation of an additional five million tons of grain per year, much of it sourced from Cargill itself, however the facility will be open to third parties.

Construction on the state-of-the-art terminal is scheduled to begin on February 27, 2016 and is expected to be completed in the spring of 2018. Once operational, it is expected to generate UAH 300 million (US$11 million) in tax payments per year, according to MV Cargo representative, Andrey Stavnitser, reports FBR.