MOSCOW, Russia (Reuters) – Russia can regain its place among the world’s top wheat exporters as long as it can avoid catastrophes such as last year’s massive drought.
Russia had plowed capital into its grains infrastructure as part of a longer- term strategy to push into international wheat markets.
These efforts had made it the world’s third largest exporter in 2008- 09 before falling prey to its worst drought in more than a century.
The country had aimed to diversify earnings from its energy and minerals resources and planned to increase grain production by 25 percent to 133 to 136 million tonnes and double exports to 40 to 50 million tonnes in the next 10 to 15 years.
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The drought prompted Russia to ban grain exports until July 1, 2011, which originally undermined confidence in Russia as a supplier.
However, traders still fulfilled existing contracts, buying supplies from other countries such as Kazakhstan at a loss if necessary.
Markets are likely to welcome Russian grain back with open arms as a series of weather disasters propel wheat prices to 2 1/2 year highs.
“We have lost the momentum, but there wasn’t a reverse in our long-term export strategy … and there has been no cut in the sowings area,” said Arkady Zlochevsky, president of the Russian Grain Union.
“Our clients in northern Africa and the Middle East are waiting for us eagerly as they are accustomed to buying our grain, the quality of which satisfies them.”
Countries in the region have stepped up grain purchases and are anxious to reassure populations eyeing the political turmoil in North Africa.
Russia, which had a grain crop of 60.9 million tonnes last year after 97 million in 2009, hopes to harvest 85 to 87 million tonnes this year, enabling it to resume exports on a small scale.
Zlochevsky said Russian farms can raise the planted area by 30 million acres because most of them keep free land, which they cultivate with an interval of two to three years.
“The key issue is investment in human capital,” said Narek Arutyunyan, chief executive officer of Pentagro, an agricultural company.
“We do not have sufficient professionals in the agribusiness.”
Zlochevsky said Russia may have an exportable grain surplus of 15 million tonnes in the 2011-12 crop year if the weather holds up, but will ship half that amount because the government may want to keep stocks at home for safety.
“The expectations of an 85 million tonne crop are quite feasible if the weather is favourable … but if there is a disaster, then the situation will be worse,” he said.
Higher prices abroad make exports more lucrative for producers than sales within Russia.
Voter concerns about inflation ahead of parliamentary polls in December and presidential elections next year mean the government is unlikely to allow exports unless they are sure Russia has enough grain to avoid a surge in domestic prices.
“There are great doubts that exports will be opened (after July 1),” said Ivan Tyryshkin, president of Rusgrain, a major agricultural company.
“There are many reasons, political, social. We will soon have presidential elections. And stocks are low. We do not expect any changes until the end of August. Everything will depend on the summer.”
Dmitry Rylko, director of the Institute for Agricultural Market Studies think-tank, said the government had four options after July 1 to prevent a domestic grain deficit:
• let the ban expire, which is seen as unlikely unless the harvest exceeds 85 million tonnes;
• extend the ban for another year and then gradually lift it;
• extend the ban until the end of 2011 and then lift it;
• impose export quotas, which Rylko said would require a big administrative effort.
The Russian Grain Union favours the quotas option.
