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ECONOMY > Agriculture

Japanese companies boosting imports of Russian livestock feed

  • February 27, 2020
  • , Sankei , p. 10
  • JMH Translation

by Sumiko Uehara

 

Russia is increasing production of corn for livestock feed in its Far East region. The area was originally not suitable for farming, but global warming has enabled the region’s arable land to be expanded. Facing setbacks such as falling crude oil prices and economic sanctions, the Russian government is focusing its efforts on making grain production a new pillar of its economy. Aiming to reduce its dependence on American grain imports due to the trade war with the U.S., China is investing in the Russian Far East. The investments have improved ports and other export facilities. Japanese companies that wish to diversify their suppliers and cut import costs are increasing their imports from Russia. A geopolitical shift is underway in the area of food security.

 

Daisuke Okada, the chairman of major poultry producer Akita Foods located in Hiroshima Prefecture, said of his decision to purchase over 10,000 tons of Russian corn for feed: “The key to importing grain is logistics costs, so we would never pass up a chance to ship it from the nearby Russian Far East.”

 

Akita Foods, which sells “Kiyora Gurume Shitate” brand gourmet eggs, procures its own feed. In Oct. 2019, Akita Foods invited Okada, a former Senior Managing Director of Marubeni Corporation, to be its chairman and began importing grain from Russia.

 

Japan’s feed corn imports totaled 11.5 million tons in 2019. Just under 70% of this total is imported from the U.S. Cargo takes at least 15 days to arrive from the West Coast. From Brazil, cargo takes about 40 days. Over 90% of Japan’s feed corn is imported from North and South America combined. In 2017, a record cold wave that hit North America in 2017 paralyzed the West Coast’s export facilities, causing Japanese trading companies to resort to emergency imports of costly Chinese corn.

 

On the other hand, the Russian government wants to develop grain production as an industry. The government’s goal is to increase grain exports from $26 billion (including $10 billion worth of feed grain) in 2018 to $45 billion by 2024. Due to the expansion of farmland in the Russian Far East, its production of grains such as corn and wheat in 2019 reached a record high level of 150 million tons. This is expected to increase further in the future.

 

Lack of facilities and an underdeveloped transport infrastructure were stumbling blocks to exporting grain from the Russian Far East in the past. China, which imposed tariffs on American grain imports during the U.S.-China trade war, took note of this situation. Chinese companies like government-owned COFCO Group began to actively invest in Russian Far East ports and inland delivery network infrastructure. China even dispatched farmers skilled in production techniques from its own northeastern region to Russia, and this has played a role in the improvement of Russia’s production efficiency.

 

Chinese electronics giant Lenovo Group is a major stockholder of Russia’s Legend Agro, which has a purchase agreement with Akita Foods. Legend Agro is an emerging agrobusiness backed by Chinese capital. Beidahuang Group, the largest agribusiness in China’s Heilongjiang Province, also has capital participation in Legend Agro, which is growing rapidly by expanding farmland area in the Russian Far East. Its big advantage is its exclusive grain exporting rights in the port of Zarubino, an ice-free port 100 kilometers south of Vladiostock. With exclusive rights, it is not subject to congestion.

 

In the past, Mitsui & Co. Ltd. has partnered with leading Russian grain producer Rusagro to import feed corn. It has been reported that major American grain producer Cargill and Singapore’s Wilmar International are also considering investing in the Russian Far East. It is now up to Japanese companies to see how much headway they can make in the scramble to secure the world’s grain.

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