Russia, already renowned for bargain wheat prices, is to get a further competitive edge through upgrades to the port of Taman, Glencore said, as it added a grain terminal at the site to its acquisition list.

Glencore – which this week saw a breakthrough in its $33bn quest to purchase Xstrata – teamed up with Ukraine's Kernel Holding to pay $265m for a grain export terminal at Taman, a deep sea Black Sea port which is at the centre of a development drive.

The recently-built terminal, purchased from Efko, a vegetable oil group, was the first for grains at Taman, which is noted among Russia's Black Sea ports for being ice-free in winter, unlike sites in the nearby Azov sea, where ships were frozen in last winter, disrupting exports.

The terminal "will enable Russian grain to be exported throughout the year", Glencore said, a factor which will in turn "increase the competitiveness of Russian grain on the world market".

Russian wheat is already renowned for competitive prices, although a drought-hit harvest this year has limited the country's exportable surplus.

Growing port

Taman is being upgraded not only through a grain terminal, but also with rail access, over which authorities in the local Krasnodar district – a major source of Russian grain for export – and the country's ministry of transport signed an investment agreement a year ago.

The facility sold by Efko is currently the major truck hub for grains on Russia's Black Sea.

The site, which can accommodate panamax vessels, also has potential for an extra 2m tonnes of grain a year, at a cost of some $60m-80m, with Russia's United Grain Company also having expressed an interest in investing in Taman.

The extra volumes will help Russia cope with demand which its existing ports, even its giant Novorossiysk site, are struggling to cope with.

For wheat, even after a poor harvest, the spate of orders from the likes of Egypt and Iraq has left Russia's exports looking "logistically very tight", analysis group Fryer noted.

Export potential

Meanwhile, a range of international crop traders, besides Russia's own Summa group, are scrambling to gain share of a grain export market which, despite hiccups in 2010 and this year, is expected to become increasingly important as investment in infrastructure and agriculture bears fruit.

Russia's overall grain exports are "expected to be around 51m tonnes a year by 2021", on production expected to grow by 35%, or 34m tonnes, "within a decade", Kernel said on Tuesday.

Singapore's Olam International has been notable this year for its increased aggressiveness in the market.

'Large-scale deployment'

Glencore, which is already a large player in Russian grain exports, said that the purchase of the Taman facility would enable it "to further meet the needs of its customers" in Europe, the Middle East and Africa.

Kernel - which has long coveted expansion into Russia, and bought a sunflower seed crushing operation there last year - said that the terminal "will serve as a platform for the large-scale deployment of Kernel's grain export business from Russia".

Kernel is already a major exporter of grain from Ukraine, where it also boasts farming, elevator and vegetable oil operations.

Kernel shares, which are listed in Warsaw,  closed 3.2% higher at 67.15 zloty.

In London, Glencore stock ended 1.2% lower at 338p.