February 26, 2010

Russia eyes port investment to increase Asia grain export

Russia expects a mix of US$50 million to US$100 million in public-private investment in port projects in its far east to boost grain exports to Asia.

The country aims to ship a million tonnes of wheat to Japan within two years, according to deputy agriculture minister Sergey Korolev.

He said Russia's state grain trader, United Grain Company (UGC), was in talks with Japan, Indonesia, Bangladesh, India and Pakistan for long-term supply deals. The country aims to be a reliable and stable grain supplier on a long-term basis, he said.

Russia's aim to lift grain exports to Asia will challenge sales from traditional heavyweights such as the US, Brazil, Argentina and Australia, who enjoy a majority market share. The move could also weigh on benchmark Chicago Board of Trade prices, as Japan and South Korea are leading importers of US grains.

Korolev said the company is still in discussions, but it is hoped the contracts will soon be signed.

The UGC will export wheat to Cuba and Bangladesh in the first of several deals to offload large state stocks with minimum impact on world grain prices, said company CEO Sergei Levin last month. The company will export up to 300,000 tonnes of wheat to Bangladesh under an inter-government pact that will blueprint similar deals with other nations over the next two years before commercial trade begins.

Russia is hoping to complete its Far East port expansions by 2011, enabling the country to tap the rapidly growing Asian market where it has only a limited exposure, said Korolev.

It is a combination of private and public investment. Japanese companies are showing big interest in investing in Far East ports, the minister said.