WHEAT FOCUS: Russian wheat sector turns to international market
its food industry. However, a limited domestic market, reduction in
Russian livestock and a slow down in the consumption of bakery
products is forcing the industry to pursue the international export
market - so says the Russian National Grain Union.
According to Alexander Korbut, vice-president of the Russian National Grain Union, the wheat industry is having to reinvent itself to keep pace with the rapid increase in crop production. But now that demand from the domestic market has slowed, the industry has had to turn to the international market.
"On the one hand, wheat prices in Russia are currently high,making the domestic market attractive. On the other hand,the entire global industry has experienced an increase in demand for wheat, and this gives Russian exporters a good chance to raiseexports to other countries."
Currently the main export markets for the Russian grain industry are Northern and Western Africa, the CIS, the Middle East and south-eastern Asia. In Europe, the major export markets include Italy and Poland.
The Russian market is dominated by a handful of leading players that supply both the international and domestic markets. These include western players Louis Dreyfus and Cargill, together with Russian players Yug Rusi, Roskhleboproduct and Ruzzguliay-zerno.
Although last year's yields were down due to an unusually hot summer, the harvest for 2001-2002 proved to be a bumper one, putting Russia among the top countries in the world for wheat production, along with the US, the EU, Canada, Australia and Argentina. However, because of low crop yields in 2003, Russia's position fell to number eight in the world. In 2001, the Russian wheat industry harvested some 54 million tons of wheat; in 2003 that figure fell to 36 million tons.
"Despite fluctuations in crop yields, the quality of Russian wheat has remained high in recent years," Korbut insists. "The world wheat market is liberal and very open and as a consequence trade remains uninhibited on the world markets, which means opportunities still exist for us."
Despite the harmonious picture, Korbut does point out that the division of the former Soviet Union has created a number of hurdles for the industry.
"The Russian wheat export industry remains robust. However, there is one problem that has held us back. Back in the Soviet days, the USSR also included Ukraine, Belarus and Kazakhstan and established itself as a leading wheat exporter. Despite Russia being separated from these countries, many international importers still perceive us as a 'single market', a fact that is clearly no longer true."
Korbut also emphasised a number of challenges that the Russian wheat sector is facing - problems he hopes will be tackled in the year ahead. He said that a shortage of capital for investment had led to insufficient hardware for the industry, which has resulted in a low level of moderrnisation.
In the 10 primary wheat producing regions in Russia - which include Krasnodar territory, Stavropol territory and the Rostov area - there are enough granaries and sufficient land to sustain future development of the industry almost indefinitely. However, Korbut also pointed out that certain regions, such as Bashkiria and Tatarstan, have been harder hit by a lack of modernisation programmes bought about by insufficient funding.
The interview for this article was bought about through the co-operation of Moscow-based market analysis company Market Advice.
