Russian exporters look to consolidate Middle East foothold with ‘grain hub’

Putin in wheatfieldRussia is planning to establish a ‘grain hub’ in the Middle East with the UAE, Egypt, Bahrain and Saudi Arabia on the shortlist for its location, Industry and Trade Minister, Denis Manturov confirmed last week. The site, which will be dedicated to the supply of Russian grain to the Gulf and the wider Middle East, will operate in local currencies and will have a storage capacity of between five and ten million tons of grain, 
Russian domestic production has been increasing at 5% per annum since 2014, thanks in part to the Russian government’s decision to ban the import of food from Western countries in retaliation for the sanctions imposed after its annexation of Crimea. Back in August, Russia sent shock waves through the world markets when it predicted that this year’s crop would come in at 81 million tonnes, almost 10% more than last year’s volumes.
Russian wheat exportsThis surge in production has coincided with the Middle East emerging as the world’s largest importer of wheat. A combination of dietary changes and its lack of crop self-sufficiency saw the MENA region consume about 105 million metric tons last year, just under 50% of which was imported; and with their proximity to the region giving them a significant commercial edge over their US and Australian counterparts, Russian suppliers have stepped smartly in to meet this rise in demand.
On the back of its military intervention in Syria, Russia has become a significant supplier of wheat to the Middle East in recent years and has both increased exports to traditional markets such as Turkey and gained access to new ones, including Morocco and Algeria in a bid to offset the economic impact of the collapse in oil prices. Russia is now the world’s largest exporter of wheat and flour, with wheat exports up by 20% so far this season while shipments from the EU have dropped by 25%. Last month, cheaper Russian exports prompted US Wheat Associates (USW), the export market development organisation for the US wheat industry, to announce that that it would be closing its office in the Egyptian capital Cairo at the beginning of December. 
Source: Bloomberg