CBH Group has sown the seeds of a southern Russia grain accumulation and export arm, establishing a toehold in one of Australia's major wheat export competitors near the leading Black Sea grain port of Novorossiysk.
It has formed a Russian subsidiary company called Granary LLC which has opened an office in Krasnodar, the southern Russian administrative and economic centre of about 770,000 people, 148 kilometres from the port.
The locally-registered company will enable CBH to own grain in Russia and operate as a grain accumulator and trader within that country.
It is a step up from its previous operations in Russia where it could only purchase grain free-on-board (FOB) where ownership of the grain did not transfer to CBH until it was loaded on ship.
The Krasnodar office has three Russian staff but from next month CBH grain traders will rotate through the office to gain exposure and experience of international trading in Russia.
Granary has contracted a local Russian commodities dealer to act as its representative in the region and to approach major grain growers on its behalf.
It hopes to fill two to four ships in the coming season with Russian wheat and barley, with the northern hemisphere harvest now well underway.
Trevor Lucas, who became CBH head of trading in April after being the group's barley trading manager for almost seven years, said the move was a "toe in the water" to enable CBH to better understand a major competitor.
"It's a low capital operation so if it goes pear-shaped we can easily cut our losses and walk away," Mr Lucas said, referring to the instability of the Russian economy.
Exposure to the local economy is also limited by using the local knowledge of a trusted intermediary, he said.
"They (Russia) provide about 15 per cent of the world's wheat exports and we (Australia) do about 15pc, so we are both substantial players.
"In understanding what is happening in the market nothing is more important than real-time information.
"When you are getting your information second hand, as we were trading FOB, that information can be two or three days out of date.
"This (Krasnodar office) is about gathering timely market information and understanding a competitor.
"It's also a drought hedge for us - if we have a drought in Australia we can fill orders with grain from Russia."
He said CBH had traded bulk grains, mainly from Argentina, the United States, France and Germany, for the past three to four years.
It already has offices in Hong Kong, Tokyo and Portland, in the US.
"We did one cargo to Iraq out of Russia last year. We hope to do two to four this year if it goes alright," he said.
With fertile soil and "very consistent rainfall" of 700 to 800 millimetres per year, the region around Krasnodar "was the perfect spot for accumulating grain", Mr Lucas said.
"Some of the growers have very big operations, producing 50,000 to 60,000 tonnes a year with on-farm storage and their own transport - some own their own trucking businesses and others have their own railway siding."
He said there were "relatively few hurdles" CBH had to clear to establish Granary to buy and export Russian grain.
"They produce 50 million tonnes a year and domestic use is only 30m tonnes so they depend on export," he said.
"Occasionally they'll have a bad year further to the north and the government will close the port (to grain exports) to protect their domestic market, but we now have the option of selling our (Russian) grain into the domestic market if that happens."
He said Granary would investigate other commodities such as corn in the future and the range of Russian grains, particularly hard grains, could enable CBH to "expand our suite of products" traded.
Mr Lucas said Russian grains could also complement CBH's business interests in milling.
CBH has a half share in Interflour which operates seven flour mills in Indonesia, Vietnam, Malaysia and Turkey and operates a grain port terminal in Vietnam.