Poultry
xClose

Loading ...
Swine
xClose

Loading ...
Dairy & Ruminant
xClose

Loading ...
Aquaculture
xClose

Loading ...
Feed
xClose

Loading ...
Animal Health
xClose

Loading ...
Search Result


August 27, 2019

  

Proposed Russian company aims to have greater monopoly over grain market, reports says

 

 

Russian state-controlled bank VTB has asked President Vladimir Putin to help it create a Russian grain champion to curb the role of foreign traders and give the state greater control over exports, a letter seen by Reuters shows.

 

VTB is Russia's second-largest bank.

 

The letter from VTB chairman Andrey Kostin dated June 26 explained why the Kremlin should give VTB the green light for its plan, which would weaken current grain traders, including global companies Glencore, Cargill, Louis Dreyfus and Cofco.

 

VTB and the Kremlin did not respond to requests for comments about the letter. Cofco declined to comment. Glencore, Cargill and Louis Dreyfus did not immediately respond to requests for comment.

 

Russia has become increasingly concerned about food security and reducing its dependence on imports since Western sanctions were imposed in 2014.

 

Russia has been balancing between local consumption and exports to avoid steep price rises which would be unpopular, particularly with the country's meat industry which relies on Russian grain to feed its livestock.

 

Hand-written notes on the letter made on July 11 show that Putin told the government to consider the proposal by VTB.

 

"Dear Vladimir Vladimirovich," the letter starts. "Given Russia's agricultural export potential (the equivalent of US$45bn in 2024) and also the importance of ensuring reliable grain trade in the context of national food security, VTB has drawn up a plan to create a national leader, a vertically-integrated operator that would be called 'United Grain Holding.'"

 

The new holding company would consolidate a raft of assets related to grain exports and storage and "take on the role of a leading Russian wheat trader," VTB said.

 

VTB also urged the government to support upgrading infrastructure around two strategic Black Sea ports - Novorossiisk and Taman.

 

"I think the international trade is very nervous about this report. It would naturally mean that international trading houses would lose some freedom to undertake the business they are doing now," said one European grain trader.

 

VTB has transformed itself into the largest operator of grain infrastructure in Russia over the past year and now wants to become a leading grain exporter.

 

It added that it would need another two to three years to consolidate and acquire more assets.

 

Russia has boosted production and exports of wheat in recent years due to favourable weather and a weaker rouble to become the world's biggest exporter, ahead of United States, France and Canada.

 

VTB's plan to consolidate assets into a single state-controlled holding company is reminiscent of an approach taken in other sectors such as civil aircraft manufacturing and shipbuilding with mixed success.

 

VTB first deputy CEO Yuri Soloviev told Reuters earlier in June: "A local and international trading platform, logistics, and trans-shipment (facilities) have been created. In general, our strategy is to achieve synergies by combining assets in export transportation logistics and trade."

 

The June 26 letter also said that foreign companies continued to play a key role in servicing Russia's grain exports. It said they controlled 25% of grain trans-shipment capacity in sea ports and about half of Russian wheat trade in global markets.

 

VTB said the traders did not always carry out their business with "optimal conditions for Russia," accusing them of leaving a significant part of the added value offshore.

Share this article on FacebookShare this article on TwitterPrint this articleForward this article
Previous
My eFeedLink last read