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

Russia 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.
This 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