Russia and China are expanding their trade in agricultural products

Russia and China, countries that are strengthening their political ties, have decided to expand their trade in agricultural products, promising changes for the global grain market, world-grain.com reports.

In October, Moscow-based Food Export Trade, a Russian grain exporting company, signed a $26 billion contract to supply China with 70 million tons of grain, pulses and oilseeds over the next 12 years, according to the cited source.

"This is one of the biggest contracts in the history of the Russian-Chinese trade relationship," said Karen Ovesepian, head of the new Grain Corridor initiative, an infrastructure project aimed at facilitating grain exports to China.

Following a March meeting with Chinese leader Xi Jinping, Russian President Vladimir Putin told his government to consider signing an agreement with Beijing to establish a Russia-China land transport corridor for grain. Under the project, Russia hopes to expand grain production in Siberia, the Urals and the Far East, sparsely populated parts of the country where agriculture is not as developed as in European regions. Additional quantities are planned to be sold almost entirely to China, according to the source.

"Russian grain exports to China are already booming," says Olga Zaharova, head of the sanitary department of the Russian veterinary regulatory authority Rosselhoznadzor. Since 2014, the year in which the first Western sanctions hit the Russian economy, deliveries have skyrocketed, 27 times.

In the first nine months of 2023, Russia exported 3.52 million tons of grain to China, compared with 2.2 million tons the previous year. "This is a great achievement", emphasized Zaharova, talking about the increase in exports from the current year.

In previous years, Russian agricultural exports to China were limited by numerous sanitary restrictions. In the last two years, they have been largely lifted. In 2022, China allowed the import of spring wheat and barley from Russia, while this year, peas and millet received approval, Zakharova said. Russian veterinary officials are in negotiations to open the Chinese market for corn and rice from Russia.

Grain exporters are not the only ones benefiting from trade liberalization. In September 2023, China lifted a 15-year ban on pork imports from Russia. As expected, more sanitary restrictions will be lifted in the future.

At the end of 2023 or the beginning of 2024, Rosselhoznadzor anticipates that the Chinese authorities will cancel restrictions on rapeseed imports for all Russian regions, Zakharova also informed, adding that, at the same time, work is being done to open the Chinese market for winter wheat and barley from Russia .

In previous decades, Russian grain exports to China were not only hampered by sanitary restrictions, but also by relatively high logistics costs and the lack of transport and logistics infrastructure.

• Russia maintains its share of grain exports

Russia is seeking to keep its seasonal grain export quota at a high level, which is unlikely to affect supplies, after another major wheat harvest, reports Bloomberg.

A grain export quota of 24 million tons will probably be set in the second half of the season, from February 15 to the end of June, the Russian Interfax news agency announced, citing the statement of the Deputy Minister of Agriculture, Oksana Lut. The quota level for wheat has not been specified, notes Agerpres.

"The level of the grain export quota is quite generous", which means that it will probably not limit exports, said Dmitri Rilko, the director of the Russian consulting firm IKAR.

While Russia has previously used grain export quotas to boost domestic supplies, the Kremlin is mimicking the cap introduced for 2022, meaning there will be little impact on global markets. The developments reflect another major harvest for the country that consolidated its position as the world's leading wheat supplier after invading Ukraine.

The war launched by Russia - including the blockade and bombing of ports - has hampered Ukrainian food exports. In contrast, Russian traders overcame financial and logistical difficulties, managing to make record deliveries.

Interfax specified that the grain export quota also includes deliveries from Ukrainian territories occupied by Russian forces.