“All conditions were established for the development of flour export in Russia. Businesses have the necessary production reserve capacities. Unlike Turkey, Russia’s government does not back the flour export. Therefore, the important thing is not to invest but to provide the state’s backing for Russia flour export so that we can compete against exporter of other countries that enjoyed for a long time. We believe that Russia may increase its flour exports several times and become one of the biggest exporters of this product.”
President of The Russian Union of Flour Mills and Cereal Plants
In 2017/18 season, Russia broke the record by exporting 52.4 million tons of grain that meant 47 percent increase when compared to the previous year. 40.5 million tons of these exported grains were wheat. In this season, Russia is expected to export 38-39 million tons of wheat. In the last three years, Russia tripled the wheat it exported and increased its global share to twenty percent. The country now eyes on increasing its flour export.
Russia has seven thousand mills – large and small. However, only three hundred of these mills carry out industrial production. The annual production of wheat flour is 13.5 million tons. Russian’s share in the world flour export does not exceed 1-2 percent. Nevertheless, Arkadiy Gurevich, President of The Russian Union of Flour Mills and Cereal Plants, believes that Russian business people can increase their shares. To do this, they need the government’s support.
Speaking to Miller Magazine, Gurevich commented on Russia’s milling sector, saying that Russian government, unlike Turkish, does not support the flour export. The government, Gurevich claimed, backs the wheat producers that go against the flour business’s interest. He said Russia has the required raw material and the production capacity to increase its flour export, adding that they need the government’s backing for the flour export. If that condition is met, he said, Russian flour industrialists have a chance to compete against other exporters.
The following is the interview with Arkadiy Gurevich:
Mr. Gurevich, could you please give us some information about The Russian Union of Flour Mills and Cereal Plants? What is the mission of your Union? Could you please tell us about your activities as an association in the milling industry?
The Russian Flour Mills and Grain Businesses Association is an umbrella organization for flour and grain producers active in the agricultural sector, equipment producers of production and laboratory, science and education institutions, the media organizations active in this sector. The history of the Flour Millers’ Association goes back 1888 that Russian millers had gathered to hold their first congress and professional millers’ union had been created.
Nowadays, the Flour Millers’ Association represents the millers’ interest, protects their interests in the government, facilitates a connection between businesses, and supports through informational and analytical materials. The association has many foreign companies from Turkey and China and also countries from the European Union and the Eurasia Economic Union.
Could you please give us some information about the Russian flour milling industry?
There are seven thousand mill businesses in the country, according to the evaluations of the Russian Flour Mills and Grain Businesses Association. However, sixty percent of the total flour production in the country belongs to industrial flour milling. There are approximately 300 facilities that carry out the industrial production. These facilities are developed industrial organizations that have the capacity, high efficiency, and technologically advanced. According to statics, Russia produces 13.5 million tons of wheat flour and 1.5 million tons of rye flour.
Russia is one of the prominent countries in grain production. That is, Russia does not have the raw material problem. Nevertheless, what sort of problems do Russian flour millers have?
The basic problem of Russian flour millers is that they have an excess production capacity. In recent years, the significant number of milling companies has closed down in Russia because of high competition.
In the last three years, Russia tripled its wheat export. Russia is now the world’s largest wheat exporter. How did Russia accomplish this success?
Traditionally, Russia is one of the prominent grain exporters. However, the flour export is less developed compared to the grain export. In the world, Russia’s share is twenty percent in the wheat export, but its share does not exceed 1-2 percent in the flour export.
Together with increased production, Russia has been trying to increase its wheat export and find new markets. Do you think Russian grain export could be further increased?
We think that Russia should increase its exports in products with a high level of processing like flour, grain, and feed.
There has been a significant modernization of Russia’s grain supply chain. Private and state-owned companies in recent years have modernized grain terminals. Is there a same modernization trend in Russian flour milling industry? Could you tell us investment plans and projects in that regard?
All conditions were established for the development of flour export in Russia. Businesses have the necessary production reserve capacities. Since the flour export market is not as big as the grain market and no special terminals are required for loading and unloading operations, port capacities are quite sufficient. The product quality produced in Russia is high. Since the flour quality criteria in Russia are higher than those of foreign countries, including the EU countries, the relevant regulations do not have to be harmonized.
First of all, the basic issues are 1- Logistic (Important flour exports like Turkey and Kazakhstan are closer to customers; 2- The importing countries developed their own milling sector; 3- A strong relationship between flour exporters and importers.
Also, unlike Turkey, Russia’s government does not back the flour export. The government usually backs the wheat producers that go against the flour business’s interest. (For example, Russian grain is exported to Mongolia, one of Russia’s largest flour importers.) Therefore, the important thing is not to invest but to provide the state’s backing for Russia flour export so that we can compete against exporter of other countries that enjoyed Moscow’s backing for a long time.
Could you please give us some information about flour consumption habits and culture in Russia? How is flour consumed in your country? Is there any change in flour consumption habit in recent years? What developments have been observed in Russian flour market recently?
In Russia, bakery products are the main food item of the people and have a rich culture, historical traditions, and economic foundations. In Russia, bread is the most important food. Traditionally, especially in villages, people bake home-made bread. First of all, they do not meet their nutritional needs, but to show hospitality, the housewife’s ability and the abundance in the house. Of course, such traditions are losing their importance today.
The production of flour products in the country is mostly made by industrial ovens. However, traditions are still able to keep the consumption rate, which has been decreasing for years, at a high level.
While the consumption percent of sweet products increases, the consumption of bakery products decreases. For this reason, there has been little decrease in the flour production. We do not expect big changes in the coming years and even in the coming decades.
Flour is a value-added product compared to grain. Russia has the raw material for the flour. Do you think Russia has become also a major flour exporter?
We believe that Russia may increase its flour exports several times and become one of the biggest exporters of this product.
Russia is the main wheat source for Turkey. In 2017, Russia got a 59 percent share from Turkish wheat imports. Russia has a substantial production of wheat and Turkey has substantial flour milling investments with excess capacity. Do you think Russia and Turkey can develop a partnership in grain and flour industry?
Just like Russia, Turkey is an important exporter of agricultural products. At the same time, Turkey is the biggest importers of Russian grain.
The proximity of the interests of our country in the agriculture and food market hints that cooperation should be established, and we need to strengthen relations based on mutual benefit.
There are some claims that Russia would limit the grain exports to ensure domestic food prices. What do you think about that subject?
Since there is a free market, grain prices will be associated with world prices while considering any administrative action in the export area. It is preferable to have the domestic price stability by the market regulations of the food market like making grain interventions.