- Dances With Bears - https://johnhelmer.online -

THE RED SICKLE MAKES A COMEBACK — RUSSIAN WHEAT FLOW TO SHIFT TO FAREASTERN PORTS

By John Helmer in Moscow

Three Japanese grain traders — Itochu, Sojitz, and Mitsui — are competing to establish the first major Russian grain export terminal at a Russian port on the Sea of Japan.

Rapid growth of demand for wheat in the Asian markets, and the price and transport advantages of Russian grain, have been stimulating Asian imports from Russia over higher-priced Canadian or Australian grains that require longer and costlier voyages. Traditionally, Russia has despatched its grain surpluses to the west, and to the southern edge of the Mediterranean. In recent years, Egypt has been the biggest buyer of Russian wheat; as well as the one of the largest importers of wheat worldwide. But for the past three months, Egyptian manipulation of incoming Russian cargoes — ostensibly to deal with weevil infestation but in reality to drive the price lower — has encouraged Russian exporters to reconsider their market strategy. Most Russian wheat bound for Asia is currently shipped from the Black Sea ports via the Suez Canal, and then through pirate-infested waters.

A source at the Russian Grain Union told Fairplay that if there were grain terminals on Russia’s eastern coast, the export capacity would run into millions of tonnes per annum. In the grain season that ended on June 30, Alexander Korbut, Vice President of the Union, said Bangladesh was the biggest Asian buyer from Russia, importing 509,000 tonnes over the year. India bought none this past year, he noted, but in the year before, 1 million tonnes. In 2007-2008, Japan bought 57,400 tonnes; this past year, just 4,800 tonnes. Malaysia is another potentially large importer of Russian wheat; this past season, it imported 10,000 tonnes. Korbut explained the dramatic fall-off in the past season’s exports to India and Japan as the result of falling wheat prices, and for Russia, rising shipment costs, making exports unprofitable. “Earlier there was a deficit of grain, now it’s rather cheap”, Korbut said.

The revival of southwestern Russia as the traditional bread-basket exporting westwards has been lucrative business for the ports of the region, particularly Novorossiysk, on the Black Sea, which shipped 2.5 million tonnes in the first three months of this year, a fourfold increase from the first quarter of 2008. The Azov Sea ports of Yeisk, Taganrog, Azov, Temryuk, and Kavkaz — little-known names outside the region — have more than quintupled their grain loadings this year; Rostov has doubled its volume.

These ports are in the middle of the Russian wheat-belt, and they are loath to risk the substantial port investment they have already made to competing grain terminals loading ships for the Asian market in the Russian fareast. The deciding factor in this contest is the Russian state railways company, RZD. The reason, export traders and port owners say, is that the cross-Siberian rail tariffs are more unstable and potentially more costly than the Black Sea-Indian Ocean freight charges. “Exports that are profitable today can be unprofitable tomorrow,” said Korbut.

Itochu told Fairplay it isn’t buying or trading Russian grain, and it hasn’t decided yet to spend money on a new grain terminal. But it admits it is planning how it may do so.