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Kernel bucks Russia, Ukraine grain export trend

Kernel Holding revealed it had bucked the trend of former Soviet Union grain exports so far in 2013-14 by seeing booming shipments from Russia - thanks to a takeover - while its Ukraine operations saw "comparably slower" volumes.

Ukraine's overall grain exports have grown faster than Russia's so far in 2013-14, rising by 13.1% to 7.40m tonnes as of October 14.

Russian grain exports for the July-to-September period grew by 9.1% to 9.04m tonnes.

However, Kernel reported the opposite dynamics at its own operations, which in Ukraine are based in the main at Transbulkterminal, Ukraine's second largest grain export terminal, with a capacity of 4m tonnes a year.

In Russia, the group last year bought a terminal at Russia's Taman port in a joint venture with Glencore.

Russia vs Ukraine

Kernel for the July-to-September period reported a 5.1% increase to 778,164 tonnes in crop volumes being handled by its export terminals, which it attributed to the Taman deal, "largely offset by the lower pace of grain exports from Ukraine".

The group's own grain sales, volumes soared 74% to 884,838 tonne, again a rise Kernel said was "driven by the ramp up of grain exports from Russia through the port of Taman, while the pace of exports was comparably slower."

Taman is in fact one of Russia's fastest growing ports, growing from capacity of 1m tonnes in 2011 to 2.5m tonnes this year, and viewed ultimately as a potential competitor in grains to Novorossiysk, which has capacity for some 11.5m tonnes of grains.

One of Taman's big disadvantages is a lack of rail access.

'Lagging harvest'

However, Kernel said that its Ukraine volumes were being held back in part by a "lagging" harvest of autumn crops, such as corn, thanks to persistent rains.

Ukraine's corn exports, at 995,000 tonnes so far in 2013-14, are actually running at half the pace of last season, with increases in barley and wheat responsible for the rise in overall grain shipments.

Furthermore, farmers were showing "unwillingness to accept low grain prices", with "anticipation of the VAT reimbursement on grain exports" due to begin at the start of 2014 an extra drag.

Ukraine's failure to hand back money owed on VAT on grain exports has reduced shipments by some 1m-1.5m tonnes a year, according to the Ukraine Grain Association.

Weaker crush

The comments came as Kernel, in a trading update, unveiled a hit too to its sunflower operations from the Ukraine's slow autumn harvest, which has delayed the replenishing of supplies left thin at the close of 2012-13 thanks to a weak crop last year.

The group's sunflower crushing volumes slumped by 49% to 232,249 tonnes, a factor reflected in a halving to 98,710 tonnes in bulk oil sales.

However, the group's yields from its own autumn-harvested showed strong growth, rising 25% to 2.1 tonnes per hectare for sunflowers and 29% to 4.4 tonnes per hectare for corn.

Kernel shares, which are listed in Warsaw, closed down 2.6% at 50.70 zloty.

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