Rostec Subsidiary attracts COFCO to the "Russia-China" Grain Corridor

The Plenipotentiary Envoy instructed the regions of Siberia to prepare proposals for St. Petersburg Forum on export deliveries of agricultural products to the PRC, which they can guarantee.
— We present a project for the organization of the New Land Grain Corridor «Russia-China» in Siberia. The need in such facility was discussed back in 2016. «Rostec» State Corporation joined the project in March 2019," said Mikhail Ulyanov, Deputy General Director of «Rostec Business Development» LLC, at the meeting in the Siberian Federal District Embassy.

Let’s recall that the initiator of the project is «Grain Terminal Zabaikalsk» LLC (GTZ). The company offered to construct a railway grain terminal in Transbaikalia for the supply of grain, legumes and oilseeds to the PRC. General Director of GTZ Karen Ovsepyan stated that in a few years after the launch, about 8 million tons of grain will pass through the terminal per year, and the total storage capacity of the elevator complex will reach 80,000 tons. Now the «Rostec» subsidiary is analyzing the project in terms of providing it with raw materials. So far, taking into account that the quota for grain delivery to the PRC is 8.5 million tons, only 120 thousand tons were delivered from the regions of Siberia in 2018.

— The project is well developed, it corresponds to the «International Cooperation and Export» national project, but we are faced with the challenge to ensure that the Siberian Federal District has enough volumes for export of ​​grain and agricultural crops, including export to the PRC. If the initial data is confirmed, then our task in the near future is to start the implementation of the project," Ulyanov stated. — In June, we have a planned meeting with representatives of COFCO (China’s largest food corporation. — Ed.). We must present to the buyer potential volumes that we can collect in the Region for export.


Novosibirsk grain obtains the opportunity to enter Asia-Pacific countries
He stressed that the project is aimed at involving all market participants, ensure clear rules of the game and transparent prices, and provide high-quality infrastructure.
In particular, the project considers the possibility to create in Siberia (in 2020- 2024) 7 additional linear elevators for 200 thousand tons each to ensure the export of more than 4 million tons of grain, as well as expanding these capacities with the involvement of fallow agricultural land in the regions.

Presidential Plenipotentiary Envoy in Siberia Sergey Menyaylo reminded to the representatives of Siberian regions that the grain corridor issue has been discussed in the district for about three years as he can observe, but no real steps have yet been taken to implement the project. Meanwhile, it could give a very good impulse to the agricultural development of the regions and growth of the export potential of the territory.

Since the summer of 2018, the possibility of creating a grain consortium in the region has also been discussed. However, to the moment only a few of the district’s farms have declared their readiness to become its members. Most market participants have questions related to the profit distribution.

Siberian grain consortium takes shape
Siberian grain consortium takes shape
— I suggest the Siberian governors to get together and hold a substantive discussion on the issue of agricultural exports within the framework of the St. Petersburg International Economic Forum. How much grain can the regions of the District collect in one «pot» to offer to the wholesale buyer? Then it will be possible to talk about a good purchase price," Menyaylo suggested. — If the regions are ready, then they should take on the obligation to confirm the declared volume of deliveries within the framework of long-term relations, to cooperate with agricultural producers, owners of grain storage sites, transport companies, and assess the prospects for increasing export potential. If we don’t see enough interest, then we will meet with «Rostec» and develop a different strategy.
According to the reaction of regional representatives and market players, they were rather wary of this proposal. In particular, Alexander Dubovitsky, Deputy Governor of the Novosibirsk Region, has noted that a number of Novosibirsk companies have already established a system of long-term relations between manufacturers, traders and foreign buyers. In 2018 grain export volume from the Region increased 6 times compared to 2017. This year, deliveries increased by 30% compared to 2018. In future, the Novosibirsk Region is ready to export about 600 thousand tons of grain per year. Alexander Teplyakov, General Director of the «Novosibirsk Food Corporation» LLC, added that since 2017 the company has been actively cooperating with COFCO to export agricultural products from Siberian regions to China.

Andrey Knorr, Vice-Governor of the Tomsk Region, is certain that export of value-added products is more important for the regions of Siberia, rather than transportation of raw materials/grain abroad.

— The Chinese are also happy to purchase processed products, such as flour. But in such situation, added value remains in our country, as well as jobs, taxes, etc.," he noted.

Ilya Barinov, General Director of «Siberian Combinate of Bakery Products» LLC (Omsk Region), added that mills in the Siberian region are now occupied by about 70%. He noted that the PRC uses protective duties on exported agricultural products, as well as tough laws that support local producers. Aleksey Melnikov, General Director of «Orbita» CJSC (Altay Territory), reminded that COFCO already purchases products in the district through a Russian subsidiary, receiving 10% VAT. He offered an idea of creating a Russian company that would perform this work. Melnikov also warned that the grain terminal with capacity of 3.5 million tons on the border between the Trans-Baikal Territory and China in Manchuria, where platforms for processing agricultural products have been created, has already been put into operation. When operating at full capacity, it can take over the entire grain export from Siberia.

It’s good that the Novosibirsk Region has direct access to a foreign buyer. But, I doubt that this opportunity is available for all farmers. In addition, consolidation will help avoid a situation where traders dictate prices to farmers," said Sergey Menyaylo. — Today they tell you one price, and tomorrow another — and there is no any guarantee that it will satisfy you. If somebody does not want to join the consortium, no one is going to force him. But I haven’t heard any suggestions yet other than how to create conditions so that you can make money. At the same time, we are spoil almost 5 million tons of grain in the district regions and then forcing agricultural producers to sell their crops for next to nothing. You produce the products you want, not the ones that the market needs, and when it falls in price, you look for the governmental support.

The Plenipotentiary Envoy stressed that now the key task for Siberia is the formation of an export corridor, as well as the consolidation of agricultural producers to ensure more efficient entry into foreign market. In future foreign buyers will receive not only grain due to this corridor but also deep processed products.

In 2018, Siberian farmers harvested about 15 million tons of grain, including 9.5 million tons of wheat.
Source: infopro54.ru