* Russia's grain terminals capacity at 30 mln T/year
* Putin aims for grain exports of to up to 40 mln T by 2020
* Cargill buys stake in KSK grain terminal on the Black Sea
By Polina Devitt and Sarah McFarlane
MOSCOW/LONDON, Jan 13 International trade houses
are buying into Russian grain port facilities to try to counter
high handling costs from one of the world's top producers of
cereals, making smaller players fear they will lose out.
Even with erratic harvests in recent years, Russia normally
ranks among the top five global wheat exporters. But a lack of
investment in export infrastructure and little competition among
terminals owners has vastly inflated grain handling costs.
To tackle this, major traders including Glencore
and, more recently, Cargill, have bought stakes in
Russian grain terminals at Black Sea deep-water ports, which
have the largest capacity and service major importers including
North Africa and the Middle East.
The deals indicate Russia's willingness to welcome foreign
investment into infrastructure supporting ports, while ports
themselves remain owned by the government.
Glencore has a stake in grain terminal in Taman since 2012,
while Cargill invested in a grain terminal in Novorossiysk in
Three grain terminals in Novorossiysk covered 27 percent of
Russia's July-Nov. grain exports, ProZerno consultancy said.
"If you've got a business model whereby you have investments
in origination but you don't have a foothold in the port then
you can be beholden to other competing entities. It's a bigger
problem in Russia because there aren't all that many export
terminals in the Black Sea," a European trader said.
A lack of infrastructure for grain exports means margins at
Russian ports can be attractive compared with other commodities
including metals and oil, allowing investments into grain
terminals to pay off within a few years.
"Grain handling costs are lower this season than two years
ago, but remain one of the world's highest," said the head of
Russia's Grain Union Arkady Zlochevsky. The costs are at $24-26
per tonne in 2013/14 so far, compared to $37 in 2011/12, he
In nearby wheat exporters Ukraine and Romania, where a lack
of terminal capacity is less critical, FOB (grain handling)
rates are around $10 cheaper than in Russia, one trader said.
Zlochevsky estimates that planned investment, mainly by
Russian companies, would take the capacity of Russian grain
terminals to about 50 million tonnes by 2020, up from 30 million
tonnes now. However, many of these projects will only be
executed if grain prices are attractive, he said.
Last year prices fell due to a rise in global output thanks
to favourable weather; wheat slipped around 20 percent.
Russia harvested 90 million tonnes of grain, including 50
million tonnes of wheat, in 2013 and is officially expected to
export 20 million tonnes of grain.
Russian President Vladimir Putin aims to increase annual
grain output to 120-125 million tonnes by 2020, boosting
potential exports to around 35-40 million tonnes.
"If it's a good crop and there's intensive exports at the
start of the campaign through to October/November, there's a
bottleneck," a second European trader said.
TOP TIER BUYS IN
Cargill, one of four so-called "ABCD" companies that
dominate the flow of agricultural goods around the world, bought
25 percent plus one share of the grain terminal Kombinat
Stroykomplekt (KSK) based in Novorossiysk in December.
The investment opens an important channel for connecting
Cargill's Russian grain origination to customers in North
Africa, the Middle East and beyond, the company said in its
latest earnings statement last week.
"If you have port elevation then you have the key to the
exports," said James Dunsterville, analyst at Geneva-based
Some small and mid size traders said the move by Cargill
could reduce the export volumes of competitors who do not have
their own terminal capacity.
"We've been working actively through that terminal so
whether we will get the access that we have in the past, because
25 percent will be now Cargill, presumably to use for
themselves... that means less volumes for everyone else," said a
Cargill was seventh in the league table of Russian grain
exporters in the 2012/13 marketing season, said Vladimir
Petrichenko, the head of the ProZerno consultancy.
The KSK terminal can handle 3.5 million tonnes of grain a
year. Cargill plans to use a portion of that capacity, while the
remaining volume will be available to the market, it said in
"Cargill will be in a much better position this could put
them amongst the first three if they want to do it. I don't
think you invest in a port silo or port facility if you are not
interested in enlarging your exports," a second European trader
Cargill declined to comment on its market share.
The other ABCD companies are Archer Daniels Midland Co
, Bunge Ltd and Louis Dreyfus. Bunge
owns a grain terminal at Russia's shallow-water port in Rostov.