Australia’s CBH to Establish Operations in Russia; Export from Black Sea

CBH, Australia’s largest co-op controlled by 4,200 grain growers, is establishing operations in Krasnodar, in Russia’s grain belt, with the goal of originating wheat and barley from Russian farmers and shipping it from the port of Novorossiysk.

The move into Russia comes after two years of consideration, and if the co-op’s expansion into the Black Sea is successful, the company will then consider expanding into handling other commodities.

“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,” CBH head of trading Trevor Lucas said.

Russia has consistently produced wheat crops exceeding 50 million tons with exports reaching 20 million tons as dropping freight costs have reduced Australia’s competitive advantage when shipping to South East Asia.

In order to keep the operation as a low capital venture due to the sovereign risks associated with doing business in Russia, CBH has completed extensive due diligence to find a reliable local service provider that would assist CBH in buying grain from local farmers and securing port agreements and transportation.

The region around Krasnodar is highly productive with generous rainfall, producing up to 8 tons of wheat or barley per hectare and up to 10 tons of corn per hectare.

CBH will use the grain originated in Russia to complement its shipments to buyers in North Africa, Asia, and the Middle East.

“We haven’t bedded down anywhere on the planet where we can truly originate behind the FOB and Russia appears to be one of the easier places,” Mr. Lucas said. “The barriers to entry in Russia are actually pretty small. Obviously there is a sovereign risk there but we think it is manageable.”

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