New logistics corridors and reducing the food security crisis in the world

According to Webangah News quoted by Mehr’s reporter, Hossein Shirzad, an analyst in the field of agricultural sector development, continued Mehr’s exclusive article about the development of transport and export of agricultural products and providing food security;

Global food security is increasingly dependent on the movement of food from major breadbasket areas to areas facing food shortages. The concentration of corn, wheat, rice and soybeans, China’s main commodities and agricultural imports, in several countries emphasizes the importance of these food bottlenecks.

Soy is the largest source of animal protein feed in the world and accounts for 65% of global supply. But only three countries, the United States, Brazil, and Argentina provide 80% of global soy exports; In addition to food, more than 180 million tons of fertilizer are needed annually to produce grains for the expanding world population.

Increasing production of agricultural inputs and pressure on several critical points

As ​​international trade in these vital agricultural inputs continues to grow, pressure is mounting on several critical points. The Suez Canal, the Panama Canal and the Malacca Strait are among the most important maritime bottlenecks and due to their strategic location that connects Western exporters with Asian importers including China, Japan and South Korea connects, experience the highest grain trade capacity.

Amid rising tensions in the Middle East, as well as increasing strategic competition between the United States and China over the South China Sea and Taiwan, Beijing is concerned that its food supply be affected by the US maritime embargo. To address these concerns, China has actively invested in infrastructure to reduce the pressure on existing strategic and sensitive points.

By diversifying its supply routes like the NLGC, Beijing can reduce its reliance on vulnerable points and ensure a more secure food supply chain. A notable example of China’s efforts to reduce these food bottlenecks is the expansion of wheat imports through land routes.

In April 2017, Russia sent its first shipment of wheat through Manjuli, a small town in Inner Mongolia exported to China and by June 2023, China imported 271.6 tons of wheat from Russia through this city. According to the Mongolian government, the annual import of Russian grain through Mongolia is expected to reach 8 million tons per year. China’s extensive imports from Russia’s Far East open a new channel for China-Russia agricultural cooperation. From Beijing’s point of view, Russia has emerged not only as a key exporter in the global wheat market, but also as an exporter with great potential for further increases in grain production and exports with the help of the NLGC Corridor (the world’s first specialized grain rail terminal with corridor land) plays a role in line with the wider trade and agricultural cooperation between China and Russia, which has expanded in the last decade and includes a memorandum of understanding on agricultural cooperation, agricultural cooperation parks, and in parallel with the establishment of an agricultural free trade zone between Heilongjiang (China) and Amur (Russia) and the leasing of agricultural land and forests in Russia has been extended to Chinese investors.

Also, the NLGC corridor offers significant commercial and economic benefits for Russia. In March 2023, Presidents Xi and Putin signed a joint statement to strengthen comprehensive cooperation in agriculture and strategic food security cooperation, which resulted in Beijing’s decision to lift a 15-year ban on meat imports from Russia later that year. Russian media reports also indicate that the two countries are negotiating to open the Chinese market to Russian corn and rice.

The expansion of agricultural production and exports to China allows Russia to capitalize on its agricultural potential to create new capacities and strengthen its economy. This development is critical given the sanctions imposed by a number of countries following Moscow’s invasion of Ukraine in 2022, which hampered Russian exports. Although trade in agricultural products is not directly covered by these sanctions, an estimated 10 countries have suspended imports from Russia for political reasons or political problems. For Russia, the NLGC corridor can help the country’s agricultural exports and increase competition in the Chinese market, while also supporting foreign trade and domestic economic development. Given these conditions and the current geopolitical climate, this partnership provides more incentives for China and Russia to strengthen agricultural trade, especially through the NLGC.

Russia’s Agroexport Center estimates that the supply of Russian agricultural products to China by 2030 will increase to 10 billion dollars a year. Currently, the import of Russian agricultural products from China has increased significantly.

What is the trade relationship between China and Russia?

In 2022, China will become the largest importer of Russian agricultural products, the volume of which has reached 7 billion dollars, which has increased by 44% compared to 2021. The delivery volume also increased by 36% compared to the previous year; In addition, in the first nine months of 2023, Russia exported 3.52 million tons of grain to China, compared to 2.2 million tons last year.

According to Russian media, more than 200 thousand Chinese farmers have been resettled and and more More than 200 companies have made large agricultural investments in the Far East of Russia. So the NLGC could increase even more Chinese investments in the sparsely populated Russian Far East, especially in Siberia and the Urals, and boost agricultural production. The region lacks adequate infrastructure and has a small population, although Chinese investment (and the corridor) could change this picture and increase China-Russia agricultural cooperation.

Today, Dalan Ghalat Zemi uses the “contract farming” model in the Urals, Siberia and the Far East. It has an area of ​​32 million hectares with the potential to produce 30 million tons per year until 2025, 60 million tons by 2030 and 90 million tons by 2035, of which more than 70 million tons will be supplied to friendly countries. In this situation, it is expected that the total capacity of Russian grain supply to friendly countries will reach 120 million tons per year.

Increasing the potential of grain production until 2035

Contract farming relies on long-term agreements with farmers, based on which only the products needed by the market are produced. Contracts are concluded based on a correct scientific and accurate attitude towards land and environment. In total, 50% of the advance payment of the annual supply fee is made, and the pricing is based on a fair formula.

It also provides full agricultural support through the use of information technology and remote sensing systems and the digital platform “Agriculture Assistant”; In addition, the ground grain corridor infrastructure includes hub elevators built along the main railway lines for uniform grain accumulation and stocking throughout the year.

Multimodal and border grain terminals create complete logistics hubs for loading and supplying grain in one direction as well as delivering various goods from China in the opposite direction. This creates a unique “Grain+” logistics from an economic point of view, because rail transport has no empty hours, trains are loaded in both directions. Only on the border of Russia and China, two facilities will work based on this model: Zabaikalsk grain terminal with a capacity of up to 8 million tons per year and more than 6 million tons of cargo. It is the return of the year. Of course, similar hubs are planned on the border of the Islamic Republic of Iran and the Republic of Turkmenistan and other regions.

Using the “Grain +” logistics model requires Russian-Chinese development and construction and the construction of a new type of warehouses Rolling is a special cereal container. They created the basis of the Russian-Chinese “Earth Grain Fleet” capable of carrying up to 600,000 tons at a time. This almost doubles the effective movement of goods across the border and transport along the Trans-Siberian Railway due to the absence of “air transport” in one direction. The next step in the development of the land grain corridor program is the signing of an intergovernmental agreement between Russia and China to demonstrate the legal support of the two countries. Today, it is being done.