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Russia Seeks to Rival U.S. in Asian Wheat Market

Russia Seeks ‘Foothold’ in Asian Wheat Market
Russia plans the “the creation of the Far East grain corridor” allowing exports to Southeast Asia, said Agriculture Minister Yelena Skrynnik in a conference message. Photographer: Andrey Rudakov/Bloomberg

Russia, set to be the third-largest wheat shipper, aims to secure a “foothold” among buyers in Asia, increasing competition for U.S. and Australian supplies.

“One of the new and promising directions for Russian grain exports is the Asia-Pacific region,” Andrey Klepach, the deputy minister of economic development, said in a message to delegates at a conference in Singapore. The segment “is now rapidly evolving and Russia has all the chances to gain a foothold.”

Futures dropped 20 percent in the past year as global crops and stockpiles headed for records and trade rose to the second-highest level in at least in five decades. The U.S., the biggest exporter, has already lost market share to Russia in North Africa and the Middle East and faces competition from record Australian shipments in Asia. More supply may curb food costs the United Nations says climbed the most in 11 months in January.

Southeast Asian importers rely on supplies from Australia, the U.S., Canada and India, according to the Russian Grain Union. Import demand in the region, the third biggest after North Africa and the Middle East, climbed almost 40 percent to 15.85 million metric tons in the past four years, the U.S. Department of Agriculture estimates. Indonesia is the largest buyer.

The U.S. is already selling less to North Africa and the Middle East because of Russia, the USDA says. Shipments to Egypt, the top buyer, slumped to 246,739 tons from June 1 to Feb. 9 compared with 2.44 million tons a year earlier when drought prompted Russia to ban exports, U.S. government data show.

‘Grain Corridor’

Exports from Russia will climb fivefold to a record 20.5 million tons this year, said the U.S. agency.

Russia plans the “the creation of the Far East grain corridor” allowing exports to Southeast Asia, said Agriculture Minister Yelena Skrynnik in a conference message. The Russian Grain Union, hosting the conference, is seeking to “attract interest to the agro-industrial sector of Siberia and Far East, modernization of storage, processing and transshipment infrastructure,” said Arkady Zlochevsky, group president.

While shipments are limited by infrastructure, exports to Asia are expanding “very fast” and may total 1 million tons this year, said Zlochevsky. The country will probably maintain overall sales at 22 million tons in 2012-2013, he said.

U.S. exports may contract 24 percent to 26.5 million tons this year, the most since the season ended 1986, USDA data show. Australian exports are poised to jump 20 percent to an all-time high, says the country’s government forecaster.

Australia has a record harvest and will sell its grain into Asian markets “ahead of anywhere else,” said Alan Winney, chairman of Emerald Group Australia Pty, the nation’s fifth-largest grain handler, in an interview this week.

Wheat for May delivery declined 0.3 percent to $6.35 a bushel in Chicago today.

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