Russia to Expand Wheat Trade Share as Exports Rise

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26 Feb 2010

Russia, the world’s third-largest wheat exporter, plans to increase its share of global trade as the country’s exports may advance by as much as 32 percent over the next five years, according to a grain industry official. The country aims to expand wheat shipments to as much as 25 million metric tons from a forecast 19 million tons this year and will target a larger market share in Asia, Russian Grain Union Chairman Arkady Zlochevsky said in an interview in Singapore today.
Growing exports from Russia will increase competition for the U.S., Canada and Australia, the largest rival shippers. Asian countries account for about 25 percent of global wheat imports, according to the U.S. Department of Agriculture. Indonesia is the world’s third-largest buyer and Japan is tied with Algeria as the fourth-largest, according to the USDA.
The world will increasingly rely on supplies from Ukraine and Russia as demand expands and output gains are capped by changes in weather patterns and limits in acreage expansion, Carlo Caiani, director at Caiani and Co., a strategy and investment advisory company in Australia, told a conference in Singapore today.
Wheat for May delivery on the Chicago Board of Trade fell 0.6 percent to $5.105 a bushel at 12:57 p.m. Singapore time. Prices reached a record $13.495 a bushel on Feb. 27, 2008, after adverse weather cut production.
Supply Sources
“One of the most important issues is how to secure a stable source of supply both in terms of quality and quantity,” Shinichi Teranishi, managing executive officer at Tokyo-based trading company Sojitz Corp. said at the conference. “For many participants, Russia may still be relatively a new choice.”
The U.S. Department of Agriculture raised its global wheat output estimate to 677.4 million tons on Feb. 9, from 676.1 million tons a month earlier, as it boosted its outlook for harvests in Argentina and Ukraine.
Russia was forecast to ship 18 million tons of the grain this year, accounting for 14.5 percent of global exports, down from 18.4 million tons a year earlier, according to the USDA.
Russia’s President Dmitry Medvedev ordered in October the development of plans for additional grain terminals to increase port capacity. The government was also asked to consider cheaper loans to renovate or build silos and drafting of legislation to spur development of fallow land.
Grain Shipments
The nation aims to raise annual exports of all grains to as much as 50 million tons in the next 10 to 15 years from 23 million in 2008. Harvests have averaged about 90 million tons annually in recent years.
Russia exported 21.7 million tons of grains last year for about $3.6 billion, Rusagrotrans, the grain unit of railroad monopoly OAO Russian Railways, said Jan. 21.
The country aims to export from 3 million to 5 million tons of grain to Southeast Asia in the medium term, Deputy Agriculture Minister Sergei Korolev said in November. Russia will first need to build export infrastructure in the Far East and reduce rail transportation costs, he said.
Russia must spend at least 100 billion rubles ($3.3 billion) building and improving grain silos and ports to meet a government goal on boosting exports, Rusagrotrans said.

Source: Bloomberg