cryptogon.com

Russia has room to store about 95 million metric tons in its silos, according to Russia’s Grain Union, comprising the biggest producers and traders. The government is forecasting a grain harvest of at least 85 million tons, while the union expects farmers to reap 97 million tons.

“This year showed a real lack of storage capacity,” Igor Khudokormov, chairman of Prodimex, a Russian sugar and grain producer, said in an interview in Moscow Aug. 19. “Nobody was ready for this. Now we are having a lot of problems to store the wheat and barley, and all the grain crop.”

Farmers are sowing more crops after prices for corn and wheat reached records this year. The jump in prices had increased concerns that the global food crisis would worsen, after sparking riots from Haiti to Egypt. A food price index compiled by the United Nations’ Rome-based Food and Agriculture Organization peaked in March.

Russia, the world’s second-biggest barley grower, needs to build more elevators in the southern and central parts of the country, where most grain is produced and exported, Grain Union Vice President Alexander Korbut said by phone from Moscow.

Building 100,000 tons of silo capacity in Russia costs about $50 million, said Michael Shneyderman, chief financial officer of Black Earth Farming Ltd. The company farms 143,800 hectares (355,000 acres) of land in Russia.

Construction Costs

Korbut estimates construction costs for 100,000 tons of capacity at about $16.4 million, excluding costs for rail, road and power connections.

The number of available hopper cars and access to ports is also an issue, Korbut said.

The country has 12,500 hopper cars for grains, more than a third fewer than are needed, according to the Grain Union. Of the total, 5,500 are more than 20 years old.

Russia’s total port capacity for exports stands at about 15 million to 18 million tons a year. The country can also send some shipments via Ukraine’s ports on the Black Sea and through Baltic ports, Korbut said.

The government is forecasting grain exports of about 15 million tons this season and has already announced plans to boost grain output by 50 percent in the next five to seven years.

“Russia needs to develop infrastructure ahead of increasing production, removing the bottlenecks,” Korbut said.

Single Harvest

The U.S. has about three times more silo capacity than it can produce in a single harvest, while in Russia “you have roughly the amount of storage you need for a really good harvest,” Allan Mustard, minister-counselor for agricultural affairs at the U.S. embassy in Moscow, said July 30.

The Russian government’s plans for a state grain trader that may control about half of all overseas sales could help improve infrastructure, Prodimex’s Khudokormov said. The government will hold a 25 percent stake, with the rest owned by private firms.

“The government now has lots of money that is lying free,” Khudokormov said. The ownership structure gives “hope it will be run on a commercial basis,” he said.