Grain Gates overtakes RIF as Russia's biggest exporter in new quota

8 Feb 2024 | Masha Belikova

The Moscow-headquartered grain exporter Grain Gates has secured the bulk of the export quota allocations announced by the Russian government on Thursday, overtaking the long-term leader in the space, the trading house RIF, according to an official document seen by Agricensus.

The government typically introduces quotas to regulate the pace of exports through the later stages of the marketing year, with the allowance typically reflecting the proportion of exports the company has handled in the year to date. 

However, in a change to the process that has been used in recent years, the Russian government has allocated 90% of the 24 million mt grain quota for the period from February 15 until June 30.

That volume, equating to 21.6 million mt, has been handed out between the various exporters active during the marketing year, and the biggest volume was awarded to Grain Gates, a company that is affiliated with Demetra Holding.

The volume awarded exceeds 4.2 million mt, or around 19.4% of the total quota.

The trading house RIF, a company that is affiliated with Dubai-based trader Grain Flower, and was previously known as GTCS, came in second place in the allocation with 3.97 million mt of grains allowed for export.

The quota is divided between the exporters based on historical results, meaning that the volume received is proportional to the share of the export company in the first half of the marketing year.

That means that, for the first time in around ten years, the previous number one exporting company RIF has been overtaken by Grain Gates, which is now in first place.

Aston remained in the same third place on the list of Russia's biggest exporters, with almost 2.2 million mt of grain quota, followed by MZK Export, a company that was formed from the forrmer-Viterra team left in Russia after the country invaded neighboring Ukraine in February 2022.

MZK was allocated 1.3 million mt, or 6% of the awarded volume.

Finally, OZK Trading, a company owned partly by the Russian state and the same Demetra holding company that owns Grain Gates, closed out the five biggest exporters list with a 985,748 mt quota.

That means that the first five biggest exporters remain the same as were seen last year, with only a change in leadership, and around 58% - or 12.6 million mt distributed between the five.

The remaining 10%, amounting to around 3 million mt, will serve as a reserve, with the largest exporters in the list able to apply to access more volume in the event that they manage to export their entire quota before the marketing year-end.

Multinational traders remain on the list, with Cofco and Louis Dreyfus awarded quotas - Dreyfus appearing in sixteenth place with 170,241 mt, and Cofco down in 161st place with just under 4,300 mt.

Last year, Dreyfus was in eighth place with an allocation of 587,000 mt, while Cofco was 59th with 43,276 mt.

The background

The updates come as talk in the market surfaced through the later part of 2023 and early 2024 that Grain Gates would overtake RIF as the main Russian grain exporter.

As such, the switch was not unexpected, with many trade sources saying that they see Grain Gates has been more dominant in the market in recent months.

The switch also comes at a time when trade sources have also commented on rumors that the trading house RIF had recently been acquired by the state-backed entity Demetra, reportedly in late December.

If true, that would consolidate ownership of a substantial minority of the Russian grain sector in one player's hands. 

A number of trade contacts – both within Russia and across the wider trading community – have already reported on the rumors coming from the domestic market, but the picture is confused and some trade sources have flatly denied it.

Agricensus has sent official requests to both of the companies involved in the rumour, but no reply has been received so far.

If such a move has happened, and there is precedent in the consolidation of private grain traders into state-backed entities, there are some potential merits, as far as the government is concerned.

The move could potentially boost returns from export operations and make it a little easier to impose the government’s will on trade dynamics that remain otherwise exposed to free market influences.

Many of the decisions made in recent years – potentially since the invasion of Ukraine began back in 2014 – have been geared towards exerting greater influence over the logistics of the country’s export muscle.

The trading house RIF owns a grain terminal in the Azov Sea, along with grain silos across the southern regions of Russia and operates 17 of its own river-sea vessels along with bulk vessels booked on time-charters, according to the local media PortNews.

The company also handles transhipments through the ports of Kavkaz and Novorossiysk, with the bulk of its volume going through Kavkaz, as the company owns its own loading on-the-road logistics in the port.

Meanwhile, Demetra Holding has been increasing its ownership of key entities in the Russian industry and currently owns the Novorossiysk Grain Terminal, half of the shares in the Taman grain terminal, and more than 35% of shares in the Novorossiysk terminal of Khleboproduktov (NKHP).

Along with that, Demetra currently owns 50% minus one share of the OZK company, the railway operators Rusagrotrans, Freight Company, LP Trans and TransLes.

Demetra Holding itself was previously owned by the partly state-owned bank VTB, but news emerged in Russian media back in July 2023 that the bank had plans to sell 45% of its shares.

That in itself was followed with the news that the Oman-based state investment fund had taken a stake in Demetra's shares, but it was not known what the size of that stake was.

Apart from VTB and the Oman-based shareholders, the remaining stakes are held by the companies JCS 'Granum' with a 27.5% stake, and Marathon Group with 27.499%.