Menu
Social Media

IKAR General Director Rylko tells how Russia became a wheat-supply superpower

“Russia has emerged as a leading player in the world grain market thanks to a combination of reasonable state policies and support of agriculture, national currency devaluation, farm restructuring, private investments, and good weather. I would especially focus on farm restructuring and investments. Most wheat and grains are produced nowadays on large and superlarge farms, which allows a lot of economy on the scale. Our farms possess modern seed drills and grain combine park. In recent years the application of fertilizers has increased substantially, and regarding chemicals, they focus on thorough fungicide treatments.”

Russia, which has increased its grain exports 9 times in the last 15 years, is expected to export 40 million tons of wheat to the world markets this season. We talked about Russia’s increasing role in the global grain markets with Dmitry Rylko, Director General of the Moscow-based Institute for Agricultural Market Studies (IKAR), one of the most esteemed authorities on that subject. Mr. Rylko is a well-known expert who is sought after for international conferences on cereals. His opinions and IKAR’s reports are published by international media organizations such as Reuters, Bloomberg, Interfax and the BBC.

Mr. Rylko explains to the Miller Magazine how Russia has become the world’s wheat export king, and shares his views on whether this success is sustainable. Here is the interview with Dmitry Rylko, General Director of IKAR, who is followed closely by the world grain markets:

Could you please provide us with some brief background information on your institution and its activities?
We are the leading Russian private agribusiness info-centric agency, providing daily, weekly, monthly price and markets reports to our customers, mostly private agribusiness corporations and farmers.

Russia has emerged as a leading player in the world grain market. Agricultural produce and foods exports increased 16-fold compared to 2000. Russia has doubled its wheat exports in the last three years. Russia is now a major player in the global wheat market. How has Russia achieved this?
It’s a combination of reasonable state policies and support of agriculture, national currency devaluation (most of the agricultural inputs such as land, labor, fuel, fertilizers, partly agrichemicals and agricultural machinery are of domestic origin, so that devaluation improves our competitiveness in the global markets), farm restructuring and private investments, and good weather.

I would especially focus on farm restructuring and investments. Most wheat and grains are produced nowadays on large and superlarge farms, so that typical acreage varies from 1000 hectares to 250000 hectares and more, which allows a lot of economy on the scale. Our farms possess modern seed drills and grain combine park. In recent years the application of fertilizers has increased substantially, and regarding chemicals, they focus on thorough fungicide treatments.

How do you see the potential of Russia to increase its wheat production? Can Russia increase its grain production substantially and expand its position in the world grain markets?
Just several years ago, in Krasnodar, our flagship wheat, and grain production region, average farmers were happy with 5 tons of winter wheat per hectare, as it allowed maximize the profit. Most advanced farmers were at the level of 6 tons per ha. Nowadays, due to investments and more intelligent management, average Krasnodar farmers are at 6+ tons per ha, our advanced farmers are at 7+tons, and some maximize the profit at the level exceeding 8 tons per ha. So we observe quite a permanent growth of productivity. Plus our farmers managed to grow what the market needs: ordinary protein milling wheat. So they are very smart people and tend to not “overinvest” and not “underinvest”.

What are the challenges for Russian grain producers and exporters?
The key challenge, in my mind, is associated with high saturation of our key wheat markets. Domestic market practically does not grow, while on the international market Russia is most competitive across the long, but quite a narrow “geo strip”, which I call a “Russian wheat meridian”: a virtual line from South Russian ports to Turkey, Azerbaijan, Eastern Mediterranean, Egypt, Eastern part of Africa to the very SAR. Russia annually exports there about 60% of its wheat, while the share of Russia on the relevant wheat markets exceeds 50% and in many cases reaches 4/5 and higher. However, due to logistical issues on the rest of world markets Russian competitiveness declines. In 2017/18 we were very lucky on Southeast Asian (SEA) markets, but this is due to problems in Australia. A year earlier Russia sold a lot of wheat to Western Mediterranean and Western Africa, just because relative wheat crop failure in France, but these are rather exclusions than the rule.

Another issue is associated with quality. Russian wheat is still not allowed in some country markets due to such issues as zero bug, or ergot. We must work both internally and with these countries to solve these problems.

Do you think Russia’s infrastructure is sufficient for meeting the export demand?
Taking in mind constant progress in this sphere, yes.

The rate of Russian wheat in Turkey’s wheat import has reached 70% level. In the 2016/17 season, Turkey imported 3.7 million tons of wheat. Do you think Turkey dependent on Russian wheat will increase?
Russia and Turkey are so strongly fit each other that this is a nice mutual dependence and market inter-coordination.

What can Russia and Turkey do feed the world? How will these two countries collaboration in the grain transaction evolve?
We must continue to mutually develop still not fully utilized market niches as Russian premium-priced hi-pro, white wheat, and durum. Russia still has plenty of unutilized resources in these spheres.