Russian Grain Export / Future and Bottleneck

Marubeni Corporation

November 12, 2010

1

Status of Russia in World Grain & Oilseeds Market

2

Important status in Wheat, not in Corn nor Soybeans

USA

41%

China

19%

Brazil

7%

EU27

7%

Russia

1%

Others

25%

Corn Production Total：810.3million ton

USA

35%

Brajil

27%

Argentina

21%

China

6%

Russia

0%

Others

11%

Soybean Production Total：259.9million ton

EU27

20%

China

17%

India

12% USA

9%

Russia

9%

Others

33%

Wheat Production Total：682.2million ton

USA

55% Arzentina

16%

Brazil

10%

Ukraine

5%

Russia

1% Others

13%

Corn Exports Total：92.2million ton

USA

44% Brazil

31%

Arzentina

14%

Russia

0%

Others

11%

Soybean Exports Total：92.8million ton

USA

16%

EU27

15%

Canada

13%

Russia

12%

Australia

10%

Others

34%

Wheat Exports Total：135.3million ton

3

Production/Consumption and Stock-to-Use Ratio

Production(L)・Consumption(R)

Stock-to-use ratio

Mil

lion t

on

%(E

nd

ing s

tock

s/C

on

sum

pti

on

)

Main reasons for increase of consumption are China’s explosive food

demand and surging demand for bioethanol supported by U.S. government.

Supply/Demand situation of Grains in the world① ～Stock-to-Use Ratio is gradually decreasing～

4

China imports 55 million tons of soybean a year. China is now a net-importer of corn and, for the future, increased import of wheat is also expected.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

200

400

600

800

1,000

1,200

1,400

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

中国の人口の推移（百万人）

農村部人口

都市部人口

都市化率

0

10

20

30

40

50

60

70

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

中国の食肉・ミルク消費の推移

（キロ/人）

ミルク

羊肉

牛肉

鶏肉

豚肉

豚肉

ミルク→Urbanizaition rate

Urban population

Rural population

Chinese population(million)

Pork

Milk

Milk

Mutton

Pork

Chicken

Beef

Meat and milk consumption in China(kg/person)

Supply/Demand situation of Grains in the world②

~China’s explosive food consumption~

5

Consumption of corn for ethanol is surging. 116 million tons of corn will

be consumed for ethanol in 2010, which equal to 2.5 times of U.S. corn

export.

About 140 million tons of corn is “needed” to fulfill required volume of

corn use by RFS hereafter.

Global S/D for grains become more and more tight

as grain supply is absorbed for energy use.

Supply/Demand situation of Grains in the world③

~Surging demand for bioethanol ~

6

Global supply and demand for grains become tight year by year due to

China’s explosive food consumption and surging ethanol demand

⇒Increased demand for wheat as an alternative feed grain.

Presence of Russia is increasing in wheat and barley market as

their export share is 13-14% of total world export.

1 EU-27 138.92 China 113.83 India 80.74 Russia 61.75 USA 60.36 Canada 26.57 Pakistan 24.08 Australia 22.59 Ukraine 20.9

10 Kazakhstan 17.0Total 680.0

【Wheat Production】

1 USA 24.12 EU-27 21.03 Canada 18.04 Russia 17.55 Australia 14.56 Ukraine 9.27 Kazakhstan 7.58 Arzentina 4.0

Total 128.9

【Wheat Exports】

1 EU-27 61.5

2 Russia 17.9

3 Ukraine 11.8

4 Canada 9.5

5 Australia 8.3

6 Turkey 6.0

7 USA 4.9

Total 148.8

1 Ukraine 6.0

2 Australia 3.4

3 Russia 2.1

5 Canada 1.4

6 EU-27 1.0

Total 16.0

【Barley Exports】 【Barley Production】

Supply/Demand Situation of grains in the world④ ～Increasing presence of Russia in Wheat and Barley Trade～

7

Russia was one of the largest importer of wheat until the early 1990s, but

changed to a net-exporter since 2001.

Domestic demand has decreased due to depressed livestock industry

caused by surged meat/dairy import along with economic deregulation.

Upward trend of yield and economy has been observed since

2001 and will be expected for the future.

Amount of Grain trade in Russia (million ton) Wheat in Russia(million ton)

Total

Wheat

Barley

Corn

Others

0

10

20

30

40

50

60

70

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Production

Consumption

Russian grain overview① ～Transition from importer to exporter～

8

Main buyers of Russian wheat are Middle-East and North African

countries such as Egypt, Turkey, Syria and Iran. Wheat and barley are

mostly dispatched from the coast of Black Sea while very limited amount

of grains are exported to Japan and SouthEast Asian countries.

⇒Three major “bottlenecks” in Russian grain export.

Middle-East North African

countries

(15-20 million

tons/year)

Eastern

Asia

(0-0.1

million

tons/year)

Central Asia

(1-2 million

tons/year)

Russian grain overview ②

～Export market of Russian grains ～

Three major “Bottlenecks” in Russian grain export

9

Insufficient siloes/warehouses in grain producing are

Insufficient flow from producing area to export terminals

Insufficient facilities/systems at exporting port

For above three points, Russia is far-away under-

developed compared with USA, the world’s

largest grain exporter.

10

Delivery of grain to exporting port is frequently delayed because of train shortage.

Long-term quality maintenance is impossible because of old country elevator.

Grains are often wasted/disposed because of capacity shortage.

Export from Far East is limited because there is no Elevator to export.

USA Russia

Production 426 million ton 108 million ton

Export quantum 108 million ton 23 million ton

Grain storage capacity about 550 million ton about 80 million ton

Port in PNW

(west)

Port in GULF

(east)

Port in Black

sea and Azov

(west)

Port in Far East

(east)

Elevator export capacity 34 million ton 67 million ton 12 million ton 0 million ton

Logistics from country

elevator to Export port train/barge barge/train train train

Number of days from

country elevator to

Export port

3 ～ 5 days 7 ～ 17 days 4 ～ 14 days 4 ～ 20 days

Comparison between Russia and USA

To increase Russian grain export --

11

Investment in country elevators, logistic network and port

facilities and override the “bottlenecks” .

Improve the quality by Governmental Support and

introduce more strict/reliable Standards.

Assure Free Trade and avoid any kind of Governmental

Intervention in order to be a reliable exporter.