Russian Ports and Railways Start to Feel Strain of Giant Harvest

Black Sea Satellite Photo file image

(Bloomberg – – Anatoly Medetsky – August 30, 2017)

Russia’s massive grains harvest is starting to put a strain on the country’s ability to ship out and store crops.

Grains output is set to surpass a Soviet-era record and exports in the season that began in July may be the biggest since the USSR collapsed a quarter of a century ago. With more crops than ever before needing to be taken from fields to as far away as Indonesia, there are signs of rail-car and storage shortages in some places and concerns shipments will reach their limit.

So much is leaving Black Sea ports that some trucks have to wait three or four days before being told they can deliver grain into port silos, according to Maksim Fisik, who runs trader Petrokhleb-Kuban in the southern city of Krasnodar. While it’s not uncommon for that to happen at this time of year, it shows ports are “choking” under the volume, he said.

While farmers typically sell the bulk of supplies in the first few months of the season, they’re stepping up the pace this year as local prices fall just as storage space runs out in some areas. Russia, which is expected to reclaim its ranking as the top wheat exporter, will probably ship out 44 million metric tons of grains this season, according to SovEcon. That’s the maximum the country can export, including from ports in neighboring Latvia, the consultant said.

“If crop estimates continue to rise, that won’t lead to higher export forecasts,” Andrey Sizov Jr., managing director at SovEcon in Moscow, said by phone. “It simply wouldn’t be possible to ship out that much.”

Not everyone sees Russia reaching its export capacity. Consultant ProZerno estimates the nation can ship out as much as 52 million tons a year, more than the 48 million tons of grains it sees being sent abroad this season.

Faster Exports

Still, at 5.5 million tons by Aug. 23, this season’s grain exports are up 22 percent from a year earlier, according to the Agriculture Ministry.

To cope with the booming export industry, some of Russia’s biggest ports are planning to boost capacity. Novorossiysk Commercial Sea Port and United Grain Co., which own the two largest Black Sea grain terminals, didn’t respond to requests for comment.

[Read more: Bursting Black Sea breadbasket seen primed for port expansion]

There are also bottlenecks for traders farther away from the Black Sea who rely more on railways than trucks to transport crops. Some merchants in central Russia can’t find enough cars to take supplies, UkrAgroConsult said in a report Monday, and Russian Grain Union Vice President Alexander Korbut said demand for rail cars significantly exceeds supply.

But that’s probably due to a seasonal peak in exports, and there are enough cars to handle the expected record volume if shipments are spread out more evenly during the season, Rusagrotrans, one of Russia’s top grain carriers, said by email. Farmers typically sell most of their crops in the three months from July to raise cash for the new season, repay loans and avoid storage fees.

This year, however, some southern growers are struggling to sell low-quality wheat to free up room for corn, which started being harvested earlier this month, Petrokhleb-Kuban’s Fisik said. There aren’t enough silos to hold grain in some Volga and central areas, according to SovEcon and UkrAgroConsult.

“We’ll just barely pass through this season,” according to SovEcon’s Sizov, who said monthly exports may reach a record of as much as 5 million tons this season. “That will give an impetus for new investment in the infrastructure of the grain market.”

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