Russian Government Regulation Limits Trade Amidst Abundant Grain Production

Published 2022년 10월 24일

According to the Russian Ministry of Agriculture, the record harvest of grain in Russia for the 2022 season, which is expected to reach 150M MT, will pressure traders due to global uncertainties and local government regulations. Due to the partial export ban of grain from March to June 22, grain exports have fallen nearly 20% YoY. With the plentiful harvest of grains and the high supply left from the previous year, the Russian government plans to revise the 2023 export quota. Still, traders are pessimistic and agree that only the total abolition of export restrictions will stabilize trade and prices over the long term.

According to the Russian Ministry of Agriculture, a record grain harvest for the 2022 season, at 150M MT, is expected, with wheat amounting to 100M MT. Farmers are worried that a large crop would significantly drop prices. Despite the plentiful harvest, grain exports have fallen nearly 20% YoY in the 2022 season due to geo-political complexities and government restrictions (partial export ban of grain from March to June 2022). Given the large harvest, the Russian government plans to revise the 2023 export quota.

Source: Tridge

According to the USDA, Russian wheat production for MY 2022/23 is estimated at 91M MT, up 21% YoY. The estimate includes 68M MT of winter wheat and 23M MT of spring wheat. The harvested area is estimated at 28.7M ha, up 4% YoY. Russian wheat mainly goes to the Middle East and Africa. In July-September 2022, wheat exports from Russia amounted to 10.2M MT, 22% YoY less than in the same period last year and 14% less than the five-year average. Also, exporters may face difficulties in deliveries due to the worsening weather conditions in the Black Sea and the seasonal lower levels of river navigation due to the drought in the summer months.

Due to sanctions in response to the military operation in Ukraine, Russian wheat exporters have faced problems supplying wheat to the world market. On July 22, a memorandum of understanding was signed on Russian exports of agricultural products. The main task was to ensure transparent and unhindered Russian food and fertilizers supplies, including raw materials for production, to world markets. It is, in particular, about how to remove the restrictions of sanctions for the export of grain and fertilizers in terms of finance, insurance, and logistics. The duration of the memorandum is three years.

Wheat Prices in Russia ($/mt)

Source: IGC and Tridge

The lower price of Russian wheat made it competitive compared to EU wheat. Estimations are that price of Russian wheat with protein of 12.5% will reach USD 334/t in W4 of October 22, still below French wheat prices, which was USD 352.75/t in W3 of October 22, restoring Russian wheat's importance in the global market.

October may be the first month of this season when wheat exports from Russia exceed last year's level and the average for the period. The volume of deliveries is estimated at 4-4.4M MT. But exporters are already preparing for lower sales due to financial problems in Egypt and Pakistan and increased purchases of Ukrainian grain by Türkiye. Although the Russian government plans to revise the 2023 export quota, producers and grain traders are pessimistic regarding long-term price movement and propose only the complete abolition of the export duty. In their opinion, this will stimulate exports, stabilize prices and increase the competitiveness of Russian grain.