If we finish it and don't take it out: why Russian wheat exports are declining
According to the results of the agricultural season-2023/24, Russia has set a record for grain exports. In total (excluding Crimea and new regions), 74 million tons were shipped abroad, of which 54 million tons accounted for wheat. This year, however, the situation is not changing for the better. According to SovEcon's forecast, wheat exports this year will amount to only 40.7 million tons, which is lower than the five-year average (40.9 million tons). The main reason is the low profitability of export operations. Whether the decrease in supplies is a fluctuation (fluctuation) or the emergence of a new negative trend is in the Izvestia article.
The margin has gone into negative territory
Analysts note that the margin of exporters went into negative territory by spring, although in the fall it ranged from $5 to $10 per ton. In addition, the pace of export is constrained by the low supply of wheat. In early March, its reserves totaled 11.6 million tons, which is 34% less than last year's figure and 9% less than the five—year average.
A quota for wheat exports of 10.6 million tons has been in effect since February 15. Large traders who have received the largest shares in the quota will not rush to supply. As a result, this quota may not even be fully utilized.
It should be noted that due to weak exports, prices for Russian wheat have jumped significantly. By the end of February, they had exceeded $250 per ton FOB (that is, when loaded onto a ship). Nevertheless, they are still not large enough to seriously heat up exporters. In addition, the sharply strengthening ruble also discourages appetites for a significant increase in supplies. To be fair, low export rates with a moderate but still good harvest (more than 81 million tons were harvested during the season) can lead to the formation of significant reserves and an increase in exports next year.
Russia consumes about half of the wheat it harvests. The rest is exported. Exports of intermediate products, in particular flour, are also gradually increasing. In 2024, it increased by 20% to a record 2023 and reached 1.2 million tons. However, on the scale of the entire agro-industrial complex, this is a drop in the bucket. Russia is almost three times inferior to Turkey, which is generally a net importer of grain. Last year's crop reduction played a role in reducing imports, but it's not just that.
Quotas and duties
As Denis Ternovsky, a leading researcher at the Center for Agri-food Policy at the Presidential Academy, noted, grain exports in Russia are determined by the balance between production and domestic consumption.
"The export regulation mechanism includes a quota for grain exports, which is set for the second half of the season (from February to June) in such a size as to fully provide domestic consumers," he explained.
He added that, unfortunately, this year's crop forecasts are also not approaching record levels, mainly due to adverse weather conditions.
"Therefore, there will be no rapid recovery in export volumes," the expert believes. — But any volume of grain exports indicates that there is enough grain on the domestic market. Moreover, it is not currently using measures to stimulate its production and export, but rather measures to support consumers, such as export duties. This tool is quite flexible, the amount of the duty depends on world grain prices and the base price set by the regulator.
The interlocutor clarified that the use of duties makes it possible to smooth out sharp price spikes and keep them at a lower level compared to world market prices. This is beneficial to flour mills, bakers and livestock breeders, and through them, to the end consumers of the products produced. However, this reduces the incentives for export-oriented grain production.
Daria Snitko, Vice President and Head of Gazprombank's Analytical Department, said that in the July 2024 - June 2025 season, wheat exports will amount to less than 40 million tons.
— According to the consensus forecast of the Price Index Center from February 2025, wheat exports were estimated at 42.7 million tons, but for the next season, which begins in July 2025, it is already at 39.4 million tons. We are not inclined to assess the dynamics of the indicator as a trend reversal, rather, the records of recent years have been an exception," the interlocutor believes. — But in general, in the long term, wheat exports from Russia will grow relative to 40 million tons over the past five years.
In turn, Finam analyst Alexander Potavin also believes that the main reason for the weak performance is in duties and quotas.:
— Against the background of unfavorable weather conditions, the Russian government introduced a quota for wheat exports in the amount of 10.6 million tons, which is significantly lower than last year's figure of 28 million tons of grain. In addition, since February, export duties on wheat have been increased, which should increase government revenues, but at the same time reduce the benefits of export sales for Russian producers.
Grain Initiative
Alexander Potavin added that the price of wheat on world markets has decreased against the background of the possible resumption of the Black Sea Grain Initiative. Black Sea wheat prices are under pressure due to weak demand, as buyers are cautious, expecting further falls to offset the growth that has been observed since the beginning of the year.
— In general, these factors lead to a decrease in wheat exports from Russia in 2025, so exports are expected to range from 40 million to 45 million tons, which is significantly lower than in previous years. In 2023, the wheat harvest in Russia amounted to 92.8 million tons, which is a significant decrease compared to the record level of 2022, when 104.4 million tons were harvested. In 2024, the gross wheat harvest decreased to about 82.6 million tons, which is also lower than the previous year, the expert cited the data.
S&P Global analysts predict that the wheat harvest in Russia in 2025 will amount to 87.5 million tons, that is, better than in the problematic previous one, but lower than in 2022-2023. The general trend indicates a decrease in the wheat harvest in 2025 compared to previous years, Potavin noted.
He added that the Ministry of Agriculture has been instructed to conduct monthly monitoring of grain stocks to ensure food security and adjust export policy.
If we take a longer-term perspective, then Russia's natural opportunities, natural conditions and climate make it possible to increase wheat exports, Daria Snitko believes.
— In the last two seasons, however, there has been a decrease in profitability in this business. Of course, the presence of export duties, a measure that is quite rare in the world experience and discourages export sales, hinders organic growth in the grain complex. Among the priorities of state support that could accelerate the development of the grain business are subsidies for putting land into circulation, investment support for the development of export infrastructure (port complexes, ships, grain carriers) and expanding the possibilities of transporting grain from Siberia by rail,— concluded the Izvestia interlocutor.
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