IKAR in Mass and Industry Media

Export plan to aid Russia wheat

FarmWeekly.com.au

PLANS to make it easier to export grain out of Russia could see the wheat producing giant soon take a greater share of the world market.

But Russian growers are facing an on-going issue caused by a low value currency, with the country's government having imposed its third export tariff on grain exports since 2008.

Attendees to the Department of Agriculture and Food and Grains Research and Development Corporation 2015 Crop Updates last week were given this unique insight into the world's fourth largest wheat exporter's operations by Institute for Agricultural Market Studies general director Dmitry Rylko.

He outlined the change in Russia from being a large importer of about 20,000 tonnes of wheat per year in 1990, to exporting 65 million tonnes in conjunction with Kazakhstan and the Ukraine.

Despite the dramatic turnaround in 25 years, Dr Rylko said Russia still had a lot to learn from Australia.

He said Australia had a unique ability to talk to quality buyers and secure strong markets on a regular basis.

Russia's largest hurdle is its low value ruble on the world stage due to plunging oil prices and sanctions on exports.

Dr Rylko said the Russian government had great concerns prior to Christmas that there would not be enough grain available domestically to feed the local population as the low priced wheat was being exported at a fast rate.

The tariff, which started on February 1, amounts to 15 per cent of the customs price plus 7.5 euros and will be no less than 35 euros per tonne until June 30, 2015.

Dr Rylko said the concern domestically once the tariff is lifted was that there would be a sharp increase in domestic prices, creating a similar environment to that which existed prior to the tariff introduction.

However, he did not hold hope for a proactive solution to come out of the government.

"They might become concerned about inflation, but they're not concerned yet as they haven't thought too much in advance, they deal with current problems," he said.

"Before Christmas we reached a dramatic level of export each and every month and provided a record amount.

"The government was concerned that the situation would leave Russia without grains and wheat."

As the tariff has added to the cost of Russian wheat, the purchase price is less competitive on the world stage and Dr Rylko said there was concern that supply into Russia's largest wheat buying countries of Turkey, Iran and Egypt would be interrupted.

Similar to WA, transport and cost proves to be a large problem for Russian growers, with distance to port creating a strain on profit.

This has led to significant infrastructure investments across the country, with the Azov and Caspian Seas featuring more than 25 new private terminals, five new or renovated terminals on the Black Sea and a deep water terminal on the Baltic Sea.

These port sites exist in addition to the flagship terminal site at Novo, which can handle up to 5mt per year.

Dr Rylko said the transport cost situation is a problem before grain reaches the port, with rail transport costs being "enormous".

This is despite a 70pc discount after the first 2000 kilometres being introduced by the government in 2013.

Dr Rylko said 2015 would position South Russia as a key contributor to the region's wheat and continue to cement Russia's position as a key exporter.

"In 2013/14, the three Black Sea countries reached new record net export levels, with the largest ever Ukrainian and second largest Russian and Kazakh exports," he said.

10.03.15

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