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Global Grain Geneva: Black Sea logistics functional, but in need of investment

Logistics bottlenecks remain in the Black Sea region

Despite Russia proving last season that its export infrastructure could handle a bumper crop, investment is still needed, panellists told Global Grain Geneva attendees.

Russia’s logistics infrastructure was expected to struggle under the weight of last year’s record crop, but there were no real logistics problems, Solaris Commodities director Swithun Still said in Geneva November 13.

“Last year we saw Russia had production of 85 million tonnes of wheat more or less, exports of 41 mln tonnes of wheat and [logistics] didn’t really suffer. There were some bottlenecks, the infrastructure of course creaking at some points,” said Still.

The main issue for Still is that Novorossiysk has three decent silos, but only one tunnel leading to the port. This creates bottlenecks, said Still.

“Yes, infrastructure is sufficient, but it’s getting to the point where - unless serious investment is made in infrastructure - we will have worse bottlenecks and poorer logistics,” said Still.

Plans are underway to deepen one of the berths at Novorossiysk from its current 11.8 metres to allow for full panamax vessels, said Still.

A difficult year

Logistically, comparing the current season in Romania to previous years is difficult as low levels in the Rhine and Danube led to volumes that would usually be handled by barge ending up on rail and road, said Cerealcom risk manager Thomas Deevy.

“The port [Constanza] is fine, it’s just about getting it into the port to process it. If it’s in the state’s hands, at least in Europe they can apply for European funding which would allow them to increase the rail to silos and improve the current infrastructure. If Romania is to grow at a steady rate it will require investment,” said Deevy.

Russia will need to rely on its own large banks, state and private, to support its infrastructure projects as sanctions prevent Russia from attracting investment from many international banks.

“Due to sanctions Russia has had to become more independent and look to its own resources to become food secure and import less – notably from the EU. Due to sanctions the Ruble has weakened and weak currency is good for exporters. With weak currency Russia has invested much more in their food sector,” said Still.

Stay tuned to IEG Vu for more coverage of Global Grain Geneva (November 13-15) and follow @GaryLeeHoward  on Twitter for live updates.

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