Russia's spell of rapid growth in grain exports will come to an end unless it solves its logistical difficulties and finds a way of cutting the cost of growing crops, US officials have said.

The Black Sea state has, over the last decade, raised its wheat exports by nearly nine times, accounting for 70% of the world growth in wheat trading.

Its share of the world grain exports has soared from 2% to 9%.

However, plans to raise that share further, to 15% in eight years time, mean overcoming huge logistical and agricultural problems, a report from the US Department of Agriculture's Moscow bureau said.

Production and logistical challenges

"Without significant improvements in the cost of production and logistics, Russia's ambitious target to export up to 40m tonnes of grain by 2018 will not be met," the briefing said.

The report noted problems including a shortage of regional elevators, poor rural roads and high costs of transportation, which were encouraging farmers to look for on-farm uses for grain, such as livestock and poultry production, rather than selling it to merchants.

Only some 35-45% of Russian grain is sold in the market, experts believe.

Meanwhile, thanks to depressed prices, farmers are still struggling to make grain production pay, despite government help in curbing fertilizer, fuel and seed costs.

Spring plantings are due to fall this year thanks to grain prices which "decreased significantly in 2009, and continued to decrease in 2010", the bureau said, adding that the soft market would curb investment in seeds, fertilizers and herbicides too.

"Grain farmers' inputs will not improve [compared with] 2009."

Port investments

The comments follow a series of Russian announcements of port investments, to boost capacity currently pegged by the government at 23m tonnes.

The United Grain Company, Russia's state grain company, said earlier this week it may collaborate in the construction of six new port export terminals, in the Azov, Baltic and Black seas, and on the country's Pacific coast.

The USDA report noted that the UGC's exports this year had been estimated at a maximum of 1.0m-1.5m tonnes.

Nonetheless, the briefing sided with the Russian farm ministry's upbeat forecast for grain production this year, of 95m tonnes, above some trade estimates of less than 90m tonnes.



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