September 6, 2011

Logistic problems threaten Russian grain exports

Russia's revival as a leader in world grain markets could be threatened as a result of logistic problems with rail transport.

Railway authority RZhD said it has banned the transportation of grain to the country's main grain shipping outlet on the Black Sea, Novorossiysk, after a jam of more than 3,600 railway cars clogged the North Caucasus branch of the national railway system.

The move could put pressure on Russia's already rapidly rising grain prices as dealers are forced to source grain from other parts of the country to reroute through different ports.

The quality of Russia's infrastructure has come under growing pressure since Moscow lifted a ban on grain exports on July 1.

The United Grains Company was set up in 2009 with the task of rejuvenating the country's grain transportation network. When exports were stalled and minimised last year because of the drought, the company's finances were dented, leaving its grand investment plans unfulfilled.

Now exports are once again surging as hard-pressed buyers scramble for some of the world's cheapest grain. The USDA forecasts Russia's wheat exports alone will more than quadruple on the year to 16 million tonnes.

Dealers say grain exports were expected to reach a near record three million tonnes next month, outstripping the country's southern port capacity of 2.7 million tonnes. Shipments are destined for Jordan, Iraq, Turkey and South and East Africa.

In Novorossiysk, which has a capacity of around 1.4 million tonnes, exporters have placed orders to deliver 500-600 railway cars a day - double the amount the port could handle, RZhD said.