What hinders exports of Russian grain?
Although Russia’s port infrastructure is sufficient for grain exports, the bottlenecks of grain flows are on railways and roads. Low turnover of railway cars results in idle time of up to 50 days while weight control on motorways leads to underloading of road trains. As for flour export, it is affected by the dumping from the side of Turkey which produces grain from Russian grain.
According to the Ministry of Transport of the Russian Federation, seaports of Russia handled 33.4 million tonnes of grain in the first half of 2023, 2.2 times more than in the same period of 2022. As before, the bulk of grain was shipped via the ports of the Azov-Black Sea Basin (over 30 million tonnes). However, the growth was registered in the Baltic ports. It was driven by the port of Vysotsk with grain handling at the terminal earlier used only for coal.
|This agricultural year is expected to bring a new record of Russia’s grain exports – over 60 million tonnes. The capacity of all grain terminals in seaports are estimated at 80 million. However, the approaches to the ports are overloaded. Meanwhile, new markets, such as Latin America, open for Russian grain, the Chinese market is still closed, the Far East Basin lacks dedicated grain terminals, there are political obstacles to exports of flour from Russia.|
According to Arkady Zlochevsky, President of Russian Grain Union, Russia’s port infrastructure is able to handle up to 80 million tonnes of grain per year while record high annual results of the previous years were slightly over 60 million tonnes. So, there is no deficit of port infrastructure, says the expert.
Russia’s grain logistics is bottlenecked at the approaches to ports, both railway and road ones.
Arkady Zlochevsky: “From time to time we face the problem of railcars congestion... In the result, the turnaround time has recently increased considerably ... With a turnaround time of 30-40 days (versus a norm of 8 days in soviet times), and sometimes 45-50 days, the railway cars are turning into storage on the track... .
As for grain transportation by road transport, the problems are caused by the prices and inability of full loading due to weight control systems. A road train able to carry 40 tonnes of grain is loaded with 25 tonnes maximum.
America is open and China is closed
As for the sales market, Russia’s agricultural industry has managed to find a logistics scheme for grain exports to the remote Latin America but is still not able to break through to the close market of seemingly friendly China. Grain export to Latin America is profitable due to the back loading of bulkers with soya, 3 million tonnes of which is annually delivered to Sodruzhestvo Soya terminal in the port of Kaliningrad.
Meanwhile, China is still closed for Russian grain on the pretext of its non-compliance with the requirements of phytosanitary control. According to Arkady Zlochevsky, China acquires Ukrainian grain although its phytosanitary characteristics are worse. The expert says that a political decision is needed to open the Chinese market.
“We have even built a terminal in Zabaikalsk, a large one, targeted at supplies to China. However, the market is still closed,” said the head of RGU.
In this context we would like to note that there are no specialized grain terminals in the Far East of Russia for grain supply to the countries of the Asia-Pacific Region. Another problem relates to the railway infrastructure: the capacity of the Eastern Polygon is insufficient and it is not able to cope with essential volumes of grain. It is already overloaded with coal and containers.
A spoon of flour in the barrel of grain
In summer 2023, RF Ministry of Agriculture reported a considerable growth of flour export which even managed to push Kazakhstan, the previous leader of flour exports.
Dmitry Patrushev, Minister of Agriculture of the Russian Federation, said: “We are consistently building up supplies of processed products which are also in demand in the foreign markets. Last year, flour exports increased almost 3.5 times. Over the first five months of this year it also increased, by almost 30%. That lets leave the added value in Russia" (quoted by TASS).
Meanwhile, Russia, which is the largest exporter of grain, has given its leadership in exports of processed products to Turkey. According to Arkady Zlochevsky, this is due to cross-subsidies supporting grain processing in Turkey, which allows for dumping in foreign markets. According to the Russian Grain Union, such a policy of the Turkish authorities contradicts the norms of the World Trade Organization (WTO).
Nevertheless, Russia is not in a hurry to challenge Turkey's actions in the WTO. Moreover, a scheme for Russian grain to be supplied to Turkey, processed there and then distributed to countries in need with the support of Arab funds is being discussed. As in the case with China, politics beats economics. We should not forget that Turkey controls the Black Sea straits and has an ability to manipulate in issues related to their passage by ships, which we wrote earlier.
IAA PortNews’ Analytical Department