Russia's grain industry is turning to increasingly niche options to ship wheat as attacks in the Black Sea continue to choke off exports from the world's biggest supplier. The latest alternative is a tiny port in the Kremlin-backed separatist region of Abkhazia, which is recognized by most of the world as part of Georgia.
Logistics operator Modern Way is offering to transport wheat and other agricultural produce from the Ochamchire port, according to four people familiar with the plans. Several Russia-based traders and brokers are reviewing the proposal to take crops to Turkey in containers. The port has limited capacity, and shipping grain in containers is expensive and unusual, a method typically reserved for high-value spices and perishable bananas.
The attacks have squeezed revenues for farmers and traders, and the Kremlin has used both pressure and incentives to maintain Russia's dominant position in the market. Russia accounts for about a fifth of the global wheat trade, and its Black Sea ports handled about 90% of exports. Attacks between Russia and Ukraine have virtually halted shipments from both nations' grain hubs, pushing wheat prices to a three-year high in August. Russia has turned to the Arctic port of Murmansk, Baltic Sea ports, rail routes to the Far East and container shipments, but these alternatives have so far fallen short of the required volume.
A standard 20-foot container can carry about 23 tons of grain, compared with dry-bulk vessels that can exceed 100,000 tons. Container shipments have gained ground thanks to Russian railway subsidies and a collapse in domestic prices, which has partly offset high freight costs. Industry officials, however, say the arrangement is not seen as a long-term solution. It is not yet clear how many traders will choose the Ochamchire route.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing