Updated July 7, 2008

   This year in Russia appears a state company that should become the largest Russian grain exporter as plans the Ministry of Agriculture. As it became known, the government approved the establishment idea of such grain trader on the state-owned Agency for Commodity Market Regulation JSC basis (APR JSC). As per authorities plan, by 2011 to this joint-stock company stake falls 40-50% from total volume of grain export from Russia that this year is estimated at $4,5-5,5 billion.

   Market participants are already actively discussing new state project in grain trading area. They know that within 2008-2009 season new player – APR JSC – appears in the sector. APR JSC is the former FSUE (Federal State Unitary Enterprise) Federal Agency for Commodity Market Regulation (FSUE FAP) at the Ministry of Agriculture, reincorporated this year. Until recently FSUE FAP was acting as state agent of grain purchase and was responsible for exercising grain interventions.

   Ministry of Agriculture head Aleksey Gordeev confirmed this information and marked that "joint-stock company instead of state corporation will be engaged in grain trading". He said that the government had already approved the idea of JSC establishment, but refused to expose details. According to a source in the Ministry of Agriculture, within the designed strategy, APR JSC should become the largest exporter of Russia’s grain to the world market within three or four years. "10-15 million tons of grain or 40-50% from total export should fall to APR stake that by 2011-2012 grows to 25-30 million tons ($6,8-8,1 billion as per current prices)", told a source. According to the Ministry of Agriculture data, within 2007-2008 season Russia exported 12,65 million tons of grain to around $4,5-5,5 billion, as calculated the market participants.

   According to the concept designed by the Ministry of Agriculture, stocks of 28 companies with the state participation will be transferred to APR balance sheet. "Federal Property Management Agency has been already given an order, and transference takes place in August", told a source in the Ministry of Agriculture. According to him, the most interesting assets comprise the Novorossiysk Center of Grain Production and six elevators, including Budenovskiy (Stavropol) and Palasovskiy (Volgograd). "Companies stocks that will be transferred to APR capital are preliminary estimated at $300-400 million, and auditors estimate them after transference is done", a source says. His words confirmed WJ company (Milora trademark) that owns 30% of Novorossiysk Center of Grain Production stocks, and the state owns 51% of the enterprise stocks. "It is one of the most valuable objects that will be transferred to APR, as this enterprise has its own transshipment terminal in the deep-water Novorossiysk port. Within 2007-2008 season 2 million tons of grain to export were transferred there", told one of WJ top-managers.

  Now the government discusses an opportunity of business structures attraction to APR authorized capital and terms of their entry, as adds a source in the Ministry of Agriculture. There is an option in terms of which the state can cut its stake in APR to 25% plus one stocks, and the rest 75% it offers to business structures. The companies of the Russian grain sector will be of high priority, and, as assert in the Ministry of Agriculture, Yug Rusi Group of Companies, agroindustrial OGO Holding Company and the Siberian Agrarian Group of Companies (SAHO) have been already offered to enter APR authorized capital. SAHO directors’ board chairman Pavel Skurikhin confirmed he had already received the Ministry of Agriculture offer. OGO directors’ board chairman Ilya Karpov says "the company specialists were engaged in the concept development as consultants". Yug Rusi representative refused to comment.

   New structure can monopolize the grain export, as fear market participants. According to Institute for Agricultural Market Studies (IKAR) data, today six companies control 60% of the Russian grain export: International Grain Company (Russia’s Glencore subsidiary), Agrika, Rosinteragroservis, Yugtranzitservis, Yug Rusi and Aston. Deliveries volume of each is 0,7-2 million tons within grain year (begins on July, 1). Annually grain traders participate in international tenders on grain deliveries issued by state-owned companies of the countries-importers (core Russian grain buyers – Egypt, India, Morocco). Bids for participation in tenders are accepted both from private and state-owned companies of the countries-exporters. "It is not clear yet, whether APR enters the market as an ordinary commercial player or we witness the export market monopolization", says Agromarket-Trade chief executive (Agrika trade subsidiary) Mark Fedotov.

   As marks head of one large Russian agro holding, the state can set quotas for export to stimulate private capital’ investments in APR. "Authorities can provide private capital interest to the project", he says. "For instance, by offering a trader to export grain in proportion to stocks’ stake he has in state-owned company".