CBH expanding into Russia

by World Grain Staff
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WEST PERTH, AUSTRALIA — CBH is setting up operations in the heart of some of Russia’s best farmland and will export grain from a major port on the Black Sea, reported The Western Australian newspaper reported on Aug. 1 .

CBH will have an office in Krasnodar, Russia and use a local service provider to buy wheat and barley direct from Russian farmers.

If it is successful in accumulating and shipping grain from the port of Novorossiysk, CBH will consider branching out into corn and other commodities.

CBH head of trading Trevor Lucas said a move into the Black Sea had been brewing for two years and was borne out of a desire to better understand a major competitor.

“We have been looking at the Black Sea area in particular because of the amount of grain they produce and export into the global market,” he said. “As it turns out, we have ended up in southern Russia with our new business.”

Lucas said Russia was consistently producing a wheat crop of more than 50 million tonnes, with about 20 million tonnes hitting an international market where falling freight rates had eroded Australia’s competitive advantage in Southeast Asia.

“Their winter crop is coming off now and it sets the scene for global prices of wheat from here on in, which obviously we are a big part of,” he said.

CBH is conscious of the sovereign risk of doing business in Russia. It has opted for a low-capital operation that relies on local expertise.

Lucas said the farmland around Krasnodar, Russia, which is about 150 km northeast of Novorossiysk, had some of the richest soil he had seen.

He said it regularly produced up to eight tonnes per hectare for wheat and barley from yearly rainfall of 700 mm to 800 mm. Corn yields are up around 10 tonnes per hectare.

CBH will use Russian grain to complement its offerings to customers in North Africa, the Middle East and Asia. It has regularly traded cargoes outside Australia, including from the Black Sea, the U.S. and France but always on a free-on-board basis.

The Krasnodar office will open with three Russian staff. CBH will manage the operations from its headquarters in West Perth, Australia.

It is the third big move from CBH in recent months after it launched a fertilizer business in Western Australia and bought oats processor Blue Lake Milling.
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