Southern ports lose grain

Export of grain via Russia’s southern ports over the first seven months of the current year fell by 18.6% amounting to 3.5 million tons. Nevertheless, branch experts think it is too early to consider this decrease to be a stable process. Russian exporters exceeded forecasts made by the Ministry of Agriculture for the current grain year (up to August 1) in respect of total volume of grain to be sold abroad.

The forecast is laid aside

At the beginning of the grain year many analysts used to forecast that grain export decrease was not to happen even in case of yield decrease against the previous year. However, the results of almost all southern ports of Russia over the first seven months of 2006 demonstrate negative dynamics. Grain transshipment decrease is the following: Azov (-63%), Temryuk (-19.8%). Yeisk (-19%), Rostov (-14.2%). The decrease was also demonstrated by the following stevedoring companies: Novorossisk Sea Trading Port OSJC (-8%) and Taganrog Shipyard (-55.3%). Grain transshipment was increased only by Tuapse Sea Trading Port OSJC (by a factor of 2.8), Tamanskji RPR (+17.8%, port of Caucasus) and Portholding CJSC (+10.9%, Novorossisk).

But not cancelled

Regardless decrease of grain export transshipment at almost all southern ports, the analysts consider it to be a temporary measure. Volume of grain transshipment is to reach the level of 2005 in the short term. Today representatives of agriculture have the possibility not to sell grain but to wait for further increase of prices. Andrej Slavutin, Vice-President of Russia’s Grain Union commented the situation in his interview with the correspondent of PortNews IAA. According to him, the prices for grain in the southern region depend to a great extent to the prices of work grain producers, so the prices for grain grow here. He thinks the situation is possible when manufactures are on the long side of the market.

The exporters’ opinion is the same. According to Alexei Yedush, Executive Director of Yugtranzitservis OJSC (the largest exporter of grain in Russia), today’s market feature is the following: domestic market price is a little bit lower, than export price, so “traders meanwhile accumulate grain”. The decrease of grain transshipment volume does not imply pro rata decrease of annual volume, Yedush says. According to him, it is necessary to consider grain reserve of the previous year as well as the world situation. “The yield is low both in America and Austria, as well as in France. So, I’m sure, that certain shortfall of this year yield will not let Russian export fall”.

The rivals take measures

However, Ukraine – one of major rivals of Russia – intends to take regular measures at the grain market. Andrei Klyuev, Vice - Prime Minister of Ukraine, initiated a meeting with leading traders of grain for the development of favorable conditions for the export of Ukrainian grain. The meeting was held in August. It was aimed at the development of issue on signing of a memorandum between the Cabinet of Ministers of Ukraine and the leading exporters of grain.

Kazakhstan – another traditional exporter of grain – is active as well. Kazakhstan’s Ministry of Agriculture reported in August about the intent to increase cropland area by a factor of 1.5 (today it is 23 million hectares) as well as to triple wheat export volume. Today Kazakhstan exports about 4-5 million tons of grain to 40 countries annually.

Starting from 2001 – 2002 Russia’s export of grain has been holding the level of 10 – 15 million tons per year. However, according to analysts, grain export transshipment via southern ports is also limited by insufficient capacity of these ports. According to the estimates, it is necessary to increase annual capacity of Russian terminals by 8 million tons in order to ensure market stability for the exporters of grain. Stevedoring companies keep an eye on the market situation, so this year two grain terminals are to be put into operation – in Novorossisk and Tuapse.

Exporters wait for the second reading

Support of exporters within the framework of the draft law On the Development of Agriculture was not considered by the State Duma at the first reading in April of this year. The draft law approved at the first reading excluded the article on Support of food and agricultural products, so Russia’s Grain Union sent a letter to the State Duma Committee on agricultural issues with the demand for restoring of the excluded article.

As Adrei Slavutin said to the correspondent of PortNews IAA , “the law should protect interests of Russian manufactures of grain, so that Russia could compete at the world markets”. He noted, that the Union is going to do its best to include the article about support of exporters into the new version of the law. Such version will be adopted in the second reading, he said.

Grain export from Russia via Russian ports: June 2005 – July 2006 (grain year)