July 9, 2012 / 3:55 PM / in 6 years

Floods damage Russian grain export routes

MOSCOW (Reuters) - Floods that hit Russia’s Black Sea coast have wrought chaos on major road and rail links to its main grain export outlet, but stocks at the port of Novorossiisk are high and may delay any impact on exports, traders and analysts said on Monday.

The effects were likely to be short-lived but laid bare the infrastructure risks faced by Russia as it attempts to secure and strengthen its status as a dominant global wheat exporter by exploiting its vast reserves of farmland.

Russian Railways said it had halted rail traffic to the port of Novorossiisk to repair a bridge southwest of Krymsk, the town hardest hit when floodwaters came crashing down suddenly in the early hours of Saturday, killing at least 171 people.

The state rail operator said the rail bed also was washed out in places. Later in the day it said traffic had resumed between Krymsk and Novorossiisk, but only southbound trains were moving and passenger trains had priority.

The Russian government has an ambitious target for grain exports to rise to 40 million tonnes a year. Russia emerged from a catastrophic drought in the 2010/11 crop year to export a record 28 million tonnes in the year to June 2012, IKAR analysts said on Monday.

The biggest obstacle to export growth is infrastructure. Novorossiisk, the main grain export port, has two terminals that are linked to the wheat fields north of the Caucasus mountain foothills by a single rail link and by mountain roads.

Even in good weather, rail backlogs outside the port are chronic.

On Monday, freight traffic up and down the coast was limited largely to food and petroleum products designated for the domestic market.

A trader with a Russian grain exporter said lorry traffic was held up at a mountain crossing north of Novorossiisk and cited estimates from grain forwarders that washed-out roads could take around seven days to repair.


An immediate reduction in the loading of grain for export is unlikely, however. Novorossiisk resumed full operation on Sunday after the weather had forced a temporary halt to loadings.

Elevators at Novorossiisk’s two grain terminals were full and stopped intake of grain last week, so they can run down their stocks to sustain current loadings, trade and port sources said.

“They just won’t be replenished quickly,” the trader said, adding that the impact on exports would emerge once port stocks are exhausted.

Transport may be functioning by then.

“As per shipments, looks like everything is going to be back to normal within the current week,” Andrei Sizov, Jr., managing director of the SovEcon agricultural consultancy, said by email.

The Novorossiisk Grain Terminal, controlled by port operator Novorossiisk Commercial Sea Port has elevator capacity of 120,000 tonnes.

It was not immediately clear how much current capacity was at the nearby terminal controlled by state-owned United Grain Co, which features a seven-storey brick elevator built in 1893.

UGC, which recently agreed to sell a stake to Russia’s largest port investor, Summa Capital, has an ambitions investment program to facilitate an increase in exports and plans to build new elevators that can hold 100,000 tonnes.

No damage to Russia’s grain and oilseed harvest was expected, because the flooding passed by key arable regions.

“The Krymsk area has never been distinguished by grain or oilseed production,” said Dmitry Rylko, managing director of the Institute for Agricultural Market Studies. “They grow vegetables there.”

Sizov, citing trader estimates, said around 10,000-20,000 hectares sown with wheat, sunseeds and other crops were likely to be damaged.

“It looks like the flood hasn’t affected any significant acreage,” Sizov said.

Rylko added that he was considering a downgrade to his harvest forecast because of protracted rain in Russia’s south, which began in late May and could result in decreased yields.

Farmers in Russia’s south have faced a long spell of extreme weather, starting with an unusually warm start to the winter, during which some of the winter crop failed to go dormant, only to be hit by a fierce cold snap that caught them with no snow cover.

Spring brought a drought, which was relieved in late May by the onset of rains, which have been falling for much of the past six weeks.

Late last month, the Agriculture Ministry cut its forecast for wheat production and exports in the forthcoming 2012/13 crop season as a result of winterkill and spring drought.

For the new season, the ministry cut its wheat crop forecast to 46 million to 49 million tonnes from 57 million expected earlier, with the export forecast cut to 16 million to 18 million tonnes from 20 million.

A Reuters poll in late June showed Russia, Ukraine and Kazakhstan’s combined wheat crop would fall 22 percent to 78.9 million tonnes this year from 2011, with the biggest impact on yields from winterkill and spring drought in Russia and Ukraine.

Reporting by Melissa Akin; Editing by Veronica Brown and Jane Baird

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