Russia's Grain Export Crisis Hits Domestic Markets

Russia's grain export problems are having a direct impact on farmers' planting decisions for the next crop, as restrictions at Azov-Black Sea terminals leave large volumes of the new harvest on the domestic market. This has led to sharply lower prices, with feed wheat being sold at around RUB 5,000/t, while estimated production costs are close to RUB 10,000/t.

The price decline comes just as farmers need working capital to complete harvesting and finance autumn planting. According to Reksoft Consulting, this year's planting campaign could cost around 20% more than a year ago. Farmers are therefore facing falling grain revenues at the same time as the cost of establishing the next crop is rising.

The pressure on the domestic market is being intensified by a relatively large harvest. Russia's grain production is expected at 135-137 mln tons, while export capacity has fallen sharply. Rusagrotrans forecasts August wheat exports at just 1.8 mln tons, 2.5 times below last year and the lowest August volume since 2010.

The Russian authorities are considering measures to remove excess grain from the market and support prices, including additional state purchases of 1-3 mln tons and a temporary suspension of the export duty. However, without a recovery in export logistics, such measures are unlikely to fully offset the loss of external demand.