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Russia's grain export season extended as huge crop tests infrastructure

Reuters, 23.08.17


MOSCOW, Aug 22 (Reuters) - The arrival of a record grain crop is expected to severely test Russia's cereal storage and transport infrastructure, pitting its supply against European Union and U.S. origin for the entire 2017/18 marketing year.

Russia, shaping up to be the world's largest wheat exporter in the coming 2017/18 marketing year, is seen harvesting between 125-127 million tonnes of grain, unofficial estimates show, beating last year's record.

In a normal year Russia would expect to complete the lion's share of exports to major buyers -- including Middle East and North African countries -- within the first 3-4 months of the marketing year, which runs from July through June. However, unprecedented grain volumes are stretching that period.

August and September grain exports are widely expected to be close to record levels, with the SovEcon agriculture consultancy expecting August exports to reach 4.5 million tonnes, just short of the record 4.6 million tonnes in August 2014.

"Infrastructure is working at maximum capacity. This means ports and railways," one grain trader said. "Railway wagons are fully occupied until November.

"If it weren't (for a lack of) infrastructure capacity, we would in general be able to supply more during these months. But it just means that the (high) pace of exports will be extended over the whole season."

Russia is able to export more than 40 million tonnes of grain in the current marketing year, which started on July 1, he added.

On Friday SovEcon raised its forecast for Russia's 2017/18 grain exports by 3.3 million tonnes to 43.6 million tonnes. Seasonal bottlenecks in Russia's grain export infrastructure have been rare in recent years after Moscow boosted storage and export capacity in ports, aiding the government in its aim of lifting the annual grain harvest to 150 million tonnes by 2030.

The situation is mixed in different regions. Railway delivery costs are up by more than 10 percent from a year ago in several regions of Russia's south but there are also reports that the costs in some of Russia's central regions rose by tens of percentage points, said Dmitry Rylko, the head of IKAR, another Moscow-based consultancy.

"The main tariff (on grain supplies by railway) has remained flat, but tariffs for related services, like the cost of wagon delivery, have risen," he added.

Infrastructure constraints across the supply chain from storage and delivery to ports are likely to become more visible in the coming months, SovEcon said in a note.

Owners of Russia's grain infrastructure are likely to have quite a profitable season and may see a sharp increase in investment from newcomers, especially in case the crop weighs in bigger than currently expected, SovEcon added.



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