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2014 Media Kit

Russia seeks ways to export large grain stocks

By: | at 08:00 PM | Ports & Terminals  

Russia, seeking new ways to export its growing stocks of grain, is considering building new terminals on Ukraine’s Black Sea coast and cutting rail tariffs via its ex-Soviet neighbour to be competitive on world markets.

United Grain Company, the state-run trader formed last year, is also in talks to sell 100,000 tons of wheat and flour to Nicaragua after agreeing on the sale of 300,000 tons of wheat to Bangladesh, the company’s chief executive said.

Russia’s ambitious plans to double its grain exports within 15 years is constrained by a lack of rail and port capacity. Now that relations with Kiev have warmed, Moscow wants to use Ukrainian ports on the Black Sea to ship expanding grain stocks.

“We are ready to examine the possibility of jointly building terminals on the Black Sea,” Ukrainian Agriculture Minister Mykola Prysyazhnyuk told reporters after meeting his Russian counterpart, Yelena Skrynnik.

“We will also examine the possibility of joint railway tariffs in order to cut the cost of transporting grain, so as to be competitive on external markets,” Prysyazhnyuk said. He gave no further details.

Russia expects another bumper grain crop of 97 million tons this year, which its Agriculture Ministry says will yield an exportable surplus of 20 million tons. This is in addition to 10 million tonnes of government grain stocks.

The Russian ministry said on Friday that the country was prepared to invest in upgrades to its ex-Soviet neighbour’s infrastructure.

Prysyazhnyuk said the idea of creating a grain trading bloc among Black Sea exporting countries had not been shelved, though it would require additional examination.

“We have agreed to continue studying this initiative,” he said. “Some ideas, even good ones, require examination, taking into account the domestic potential and their consequences for the external market.”

Skrynnik last year advanced the idea of creating a Black Sea trade bloc with Ukraine and Kazakhstan, which she said would allow its members “to lower the volatility of the world grain market and its dependence on speculative factors”.

The idea was met immediately with criticism from the West and there has been little progress in implementing it since.

State Trader Eyes Market
Russia’s state grain trader, the United Grain Company, is implementing a number of projects to dispose of the stocks it has acquired from domestic farmers to support prices, the company’s head, Sergei Levin, told reporters.

Speaking after the Russia-Ukraine ministerial meeting, Levin said a deal to sell 300,000 tons of wheat to Bangladesh—already approved by Dhaka—had yet to be endorsed by the Russian government.

“A preliminary agreement has been reached and a preliminary price has been agreed. We expect to finish work in the nearest future,” Levin said. “We are a state company and therefore all our steps have to be endorsed by the government.”

Levin said UGC was also in talks to supply 100,000 tons of wheat and wheat flour to Nicaragua as humanitarian aid.

“Initially, the Nicaraguan side wanted to receive 100,000 tons of flour, but now we are talking about a mixed shipment of flour and grain from the (government) intervention stocks,” he said, without specifying a date for the shipments.

UGC was also finalising preparations for shipping 56,835 tons of feed wheat and feed barley to Mongolia, which it expects to start this week and finish before the middle of June.

Levin declined to name other possible takers of Russian wheat. “We will announce them in due time,” he said.

He said an agricultural delegation from top Russian wheat buyer Egypt had meetings with Russian officials at the end of last week, but that no specific deals had been agreed. (Reuters)