Russian grain exports seen competitive despite higher transport costs

Russian grain exports are poised to remain competitive thanks to a weaker rouble, despite transport costs that have been inflated by tougher controls on truck weight in the last two weeks, analysts said on Friday. Russia, one of the world's key wheat exporters, has increased penalties for excess weight on trucks since late July, forcing exporters to use more vehicles.
"Costs have risen as suppliers have to use 25-30 percent more trucks than previously," said Dmitry Rylko, the head of the IKAR agriculture consultancy. "This is adding pressure on domestic purchasing grain prices." The rise in truck transportation costs is the latest increase in logistics for Russian grain exporters, inflated by a weak rouble and a tax on wheat exports, imposed from July 1.
According to IKAR, total rouble-denominated costs for some traders have risen twofold compared with the previous season. However, the rouble has lost 5 percent of its value against the US dollar since the start of August, supporting export demand, which in turn supports domestic grain prices, said Andrey Sizov, the head of SovEcon consultancy. "Transportation costs are rising, but the rouble fall is supporting exports and domestic prices. Exporters have increased purchases on domestic market in the last two weeks."
Egypt's GASC, one of the world's biggest state importers of wheat, agreed to buy 60,000 tonnes of Russian wheat at $185.65 a tonne, free-on-board (FOB), on Thursday.
FOB prices for Russian wheat with 12.5 percent protein were $188 per tonne at the end of last week, while domestic prices for third-class wheat were up 50 roubles compared with a week earlier at 9,350 roubles ($144) per tonne. The country's Black Sea ports usually get grain by truck from the south, the main wheat producing region, while supplies from remoter parts of Russia mainly arrive by rail.
The agriculture ministry estimates Russia's grain exports at almost 30 million tonnes in the current 2015/16 marketing year, which started on July 1. Since the start of the year, country has already exported more than 2.3 million tonnes of grain, down 40 percent year-on-year, as rains delayed harvesting and due to the export tax.