Russian wheat supplies to China are likely to remain fairly modest in coming years despite an agreement to expand exports as grain will only be admitted from a few of the main producing regions, the independent SovEcon agriculture consultancy said. Russia and China signed accords on grain quality control in December, technically opening the Chinese market to Russian grain after years of talks. But major supplies are yet to materialise.
"The Chinese market is open only a little rather than really open for Russian grain," Andrey Sizov, the head of SovEcon, told a conference in Moscow on Thursday. China has agreed to allow Russian spring wheat supplies from just four Siberian regions - the Altai, Krasnoyarsk, Novosibirsk and Omsk, which are unlikely to have massive volumes to offer to the world's most populous nation, Sizov said.
A Moscow-based trader told Reuters that he expected the amount of Russian supplies to China to be less than 300,000 tonnes of wheat in the 2016/17 marketing year, which starts on July 1. "Everything will depend on the level of harvest in Siberia and the government plans for restocking," the trader said. Russia's government buys grain on the domestic market to replenish its stocks each year. In the coming marketing year, the state appetite for big purchases might be weak, analysts and traders have said.
Sizov saw Russia's wheat exports to China at no more than several thousand tonnes in 2016/17 with a potential increase to 500,000-600,000 tonnes in the future years. Those estimates would be only a small part of Russian total exports, which SovEcon sees at 25 million tonnes of wheat in 2016/17. The complicated procedure for receiving supply certificates from Russian and Chinese regulators include more than 10 steps of red tape and makes the supplies less attractive, Sizov added.
Russia is not the only wheat producer with limited success in supplying China, SovEcon said. Kazakhstan, a major regional producer, has technically been allowed to export wheat to China since the 2000s, but supplied only 128,700 tonnes in 2015. The supply logistics are also still to be improved in Russia to make supplies to China more attractive. According to SovEcon, a rail terminal, the construction of which should start this year in the Zabaikalsk region, would make the supplies easier. The region shares a border with China. The terminal is expected to go into service towards the end of 2017, with a capacity of up to 800,000 tonnes in the first year of operation. Its capacity will eventually reach 7.7 million tonnes per year by 2025.