Bloomberg News

Russian Farmers Face Railway-Cost Issue, SovEcon’s Sizov Says

September 28, 2011

Sept. 28 (Bloomberg) -- Russian grain farmers face a railway monopoly that is increasing the cost of shipping crops out of the country, said Andrei Sizov, managing director of Moscow-based researcher SovEcon.

For distances of as much as 1,000 kilometers (622 miles), transporting grain is cheaper by truck than by rail because of the rates charged by OAO Russian Railways, Sizov said at the MENA Grains Summit in Istanbul yesterday.

Russia’s government was looking at lowering the cost of hauling grain by rail to help farmers in the country’s interior sell their crops, Sergei Sukhov, the Agriculture Ministry’s deputy head of agriculture market regulation, said last month.

“I don’t really think that the physical infrastructure is an issue,” Sizov said. “Tariffs yes, tariffs are high. That is because of lack of competition. I hope someday this monopoly will be broken up.”

Russia’s transport network is “relatively developed,” according to Sizov.

The high cost of rail transportation reduces opportunities to sell grain grown in Russia’s more remote regions such as the Urals and Siberia, said Sizov and Anna Supryadkina, a senior specialist with the Russian Grain Union.

“Tariffs are very expensive and right now Siberian grain is not competitive in Asian markets,” Supryadkina said at the industry meeting.

A lack of infrastructure in remote regions is a hurdle to taking unused arable land in Russia into production, according to the grain union specialist.

“If you want to use this land you have to invest a lot of money,” Supryadkina said. “Mainly in Russia we now need to invest in infrastructure.”

--Editors: John Deane, Sharon Lindores

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.


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