Russia, already the world’s largest wheat exporter, set its mind to step further into some new markets dominated by the European Union and United States in efforts to squeeze into places what have usually been its most difficult destinations.
With successful marketing practice in Iraq, Algeria and Saudi Arabia, Russia will be able to fortify its leading position in the wheat markets of the Middle East and North Africa.
Russia is now building up its advantages in grain due to cheaper oil, which keeps Russian wheat prices relatively low in dollar terms due to lower fuel costs and a weaker local currency, bringing the country’s exporters growing competitive strength to secure import orders.
“With crude oil prices remaining low, the Arab countries are asking themselves why they are paying millions of dollars more than they need to for wheat imports,” a German trader said, adding that he would expect Russian wheat to take the main share of markets opened to them in a direct price fight.
As one of major Middle East grain buyers, Iraq, depending largely on the United States for grain imports, intends to allow Russian wheat in a list of its state purchasing tenders, the nation’s new trade minister Mohammed Hashim al-Aani, said.
Negotiations to allow Russian wheat into Iraq market have been lasting for two years, but haven’t come to an end due to frequent changes to Baghdad’s negotiating panel, reported Reuters, citing a Russian source close to the talks.
The source said the new trade minister would send a delegation to Russia in December to advance the talks over Russian wheat, adding supplies to Iraq could start next year.
Russian wheat doesn’t contain enough gluten to meet Iraqi importers’ need, but is about $10 to $12 per tonne cheaper than U.S. grain shipped to the Middle East, said a U.S. wheat trader.
As U.S. traders complain American wheat is too expensive for major global buyers in the Middle East and Africa, partly due to high rail freight costs to get U.S. wheat to port, Russia is trying to improve its loading capacity of ports, with an aim to increase grain export capacity by 25 million tonnes to 77.7 million tonnes by 2022.
Russia’s grain exports hit a record high at 52.4 million tonnes in the 2017/18 season, up 47 percent from the previous year, including 40.5 million tonnes of wheat. Grain exports estimated for this season are between 38 and 39 million tonnes.
While Russia’s presence in Iraq could be a heavy hit to the United States, Russian expansion into Algeria and Saudi Arabia would pose a serious competition to sales from the EU, the largest shipper to Saudi.
Russian wheat has been blocked away from international tenders in Algeria, one of the world’s biggest wheat buyers, for its failure to meet strict bug damage controls of the North African nation.
Also, Russian wheat is not currently in the list of candidates for Saudi purchasing tenders due to the Middle Eastern nation’s high-quality specifications.
However, Algeria’s neighbors, including Tunisia, Libya and Morocco, are all buying Russian wheat now. Russian wheat is also being shipped to Jordan and Nigeria, with supplies to those countries expected to be boosted in coming years.