RLL Container Report - 12 October 2016
From: John Keir, Ross Learmont Ltd. Email: john.keir@telia.com Date: 12 October 2016
Going against the grain.
According to the United States Department of Agriculture, Russia now leads its North America rivals in the volume of grain exports, with 35 million tons shipped in 2016. This is 3.5 million more than the USA, and exceeds by 2 million tons Canadian exports. One of the companies to benefit from the surge in popularity of Russian grain exports is RusAgro. RusAgro is Russia’ largest vertically-integrated agricultural business group and a leading producer of sugar, pork, margarine and mayonnaise. In 2015, the company harvested over two and a half million tonnes of sugar beet and almost seven million tonnes of grain.
Already a significant player in the global wheat market, Russian agriculture has switched its attention to corn. Corn is easy to produce and input costs are relatively low. Also, Russian farmers grow a non-genetically modified variety, which is very much in demand especially in countries such as India, Turkey and South Korea. As a result, corn exports from Russia rose by 31% and are expected to rise by another seven percent this year. Unusually for a bulk shipper, RusAgro has decided to “go against the grain” and has instead opted to team up with Far East Shipping Company to develop a facility in Vladivostok to handle containerised agricultural exports to countries in Asia.
The facility will make use of standard technologies as well as a variety of specialised containers. By utilising the existing modern intermodal transport infrastructure, RusAgro’s products can compete much more effectively with foreign competitors in the Far East and Pacific region. RusAgro is looking to take advantage of the Russian Far East’s geographical proximity to China, as well as the region’s mild climate to expand its exports of agricultural products not only to the People’s Republic but also to many other countries in South East Asia. The milder climate around Vladivostok is suitable for a wide variety of crops, which can easily be inspected and certified by Chinese authorities. The products derived from grain and other crops can then be transported to their final destinations using a range of containers including dries, bulks, reefers and tanks.
Co-operation with Fesco means that RusAgro will not have to start from scratch and can immediately take advantage of Fesco’s extensive intermodal infrastructure, as well as its agency network to expand rapidly into new markets. Fesco will set aside an area for agricultural exports at its container terminal in Vladivostok and this will be fully up and running by next year. Indeed, since January of this year, the two partners have been carrying out a series of test shipments to destinations in South East Asia. Russian agriculture has come a long way in a relatively short time span.
John Keir, Ross Learmont Ltd.
12 October 2016
Copyright ©, 2016, John Keir