December 15, 2010

 

Russian grain exports attract grain giants

 

 

Global crop merchants such as Cargill and Louis Dreyfus are awaiting a major share growth in Russian grain trading, as the effects of recent export bans clobber domestic rivals, an analyst said.

 

The refusal by Rias Trading, the top Russian-based wheat exporter, to open a silo for certification is the latest in a series of ructions in the domestic industry from Moscow since August's banned grain exports.

 

Many of Russia's private traders have been forced to give up assets, such as elevators, which were placed as collateral against bank loans, because of the loss of revenues to the export ban.

 

"For Russian companies, it is going to be more and more challenging to stay in business," said another analyst. He also added that domestic traders are likely to be given only limited leeway when shipments resume.

 

"Banks will be watching them more closely," he said.

 

However, the grain giants who have been steadily expanding in Russia will not be subjected to the same strictures, giving them a head start when exports recommence, albeit a process not expected to start until at least next summer.

 

"International companies will not face the same pressure. The level of grains exports handled by international companies will increase," the second analyst said.

 

Giants such as Bunge and Glencore already account for the majority of the bulk grain trade, shipped from deep sea ports to destinations such as Asia and Egypt, although they have a smaller share of exports from vessels chartered from ports such as Azov typically to Mediterranean destinations.

 

Glencore's International Grain Company is already the top-ranked merchant in Russia, which was the world's third-ranked wheat exporter in 2009-10, a season which ended before August's ban was imposed.

 

The international companies are also making growing inroads into domestic trading, the second analyst said.

 

Meanwhile, Russia's state grain trader, the United Grains Company, is also hoping to raise its market share due to the surrender of assets by privately-owned rivals.

 

"New assets will contribute to the implementation of our target which is to become an important player on the market," Sergei Levin, the UGC chief executive, said.