7 Reasons Why Russian Grain Exports Are Booming in 2024

Russia is the world’s leading exporter of grain, especially wheat, in 2023. According to the International Grain Council, Russia exported 57 million tons of grain in the 2022/23 season, a record high. What are the factors behind this impressive performance? Here are seven reasons why Russian grain exports are booming in 2023.

1. High domestic production.

Russia harvested 157.7 million tons of grain in 2022, the second highest crop in its history. This was due to favorable weather conditions, improved seed quality, increased use of fertilizers and modern machinery, and expanded cultivated area. Russia has about 220 million hectares of arable land, of which only 80 million are used for grain production. This means there is still potential for further growth.

2. Low production costs.

Russia has a competitive advantage over other major grain exporters, such as the EU, the US, Canada, and Australia, in terms of production costs. According to the Russian Grain Union, the average cost of producing one ton of wheat in Russia is about $120, compared to $200 in the EU and $240 in the US. This is mainly due to lower land prices, labor costs, and taxes.

3. High demand from importers.

Russia has a diversified portfolio of grain importers, ranging from traditional markets in the Middle East and North Africa, such as Egypt, Turkey, and Algeria, to new destinations in Asia and Latin America, such as China, Indonesia, Vietnam, Mexico, and Brazil. The demand for Russian grain is driven by population growth, urbanization, income growth, and changing dietary preferences in these regions. Moreover, some importers prefer Russian grain for its quality, consistency, and traceability.

4. Flexible logistics and infrastructure.

Russia has a well-developed transport network for grain exports, including railways, roads, ports, and terminals. Russia has access to several seas and oceans, such as the Black Sea, the Baltic Sea, the Caspian Sea, and the Pacific Ocean, which allows it to ship grain to different regions of the world. Russia also has a flexible pricing policy for grain exports, which can vary depending on the destination, seasonality, and market conditions.

5. Supportive government policies.

The Russian government has been supportive of the grain sector by providing various subsidies, incentives, and programs to boost production and exports. For example, the government provides subsidies for interest rates on loans for agricultural producers, compensates part of the transportation costs for grain exports, supports the development of rural infrastructure and storage facilities, and implements measures to protect domestic food security and stabilize prices.

6. Innovation and digitalization.

The Russian grain sector has been adopting new technologies and innovations to improve efficiency and productivity. For example, some producers use drones, satellites, sensors, and artificial intelligence to monitor crops and optimize inputs. Some exporters use blockchain platforms to facilitate transactions and contracts with importers. Some processors use biotechnology and nanotechnology to create new products and add value.

7. Resilience and adaptability.

The Russian grain sector has shown resilience and adaptability in the face of various challenges and uncertainties in recent years. For example, it has overcome the impact of sanctions imposed by some Western countries since 2014 by finding new markets and partners. It has also coped with the effects of climate change and extreme weather events by implementing adaptation strategies and practices. It has also responded to the COVID-19 pandemic by ensuring uninterrupted supply chains and trade flows.

In conclusion, Russian grain exports are booming in 2023 due to a combination of factors that make Russia a reliable and attractive supplier of grain to the world market. Russia is expected to maintain its leadership position in the global grain trade in the coming years by continuing to invest in its production capacity, infrastructure development, innovation potential, and market diversification.

Russian Grain Exports: Trends and Prospects

Russia is one of the world’s largest producers and exporters of grain, especially wheat. In the 2022/23 marketing season, Russia exported a record-breaking 57 million tons of grain, accounting for approximately one fifth of total wheat exports. The global dependence on Russian grains has been highlighted by the recent droughts and crop failures in some major importing countries, such as Egypt, Turkey and Algeria. However, the 2023/24 season may see a decline in both production and exports of Russian grain, due to lower harvest estimates and higher domestic consumption.

Production Outlook for 2023/24

According to Arkady Zlochevsky, head of Russia’s Grain Union, the 2023 harvest is expected to be no less than 130 million tons, compared to 157.7 million tons in 2022. This is mainly due to unfavorable weather conditions in some regions of the country, such as the Volga and the Southern Federal Districts, which account for more than half of Russia’s grain output. However, improved weather conditions in other regions, especially in Siberia, may partially offset the losses. Moreover, Russia has a large stockpile of grain from previous seasons, which may support exports in the short term. Data from Russian state statistics service Ross tat show that grain stocks as of May 2023 were 61.5% higher than last year’s level, while that of wheat was 69.4% higher.

Export Prospects for 2023/24

Zlochevsky estimated that Russia may export at least 55 million tons of grain in the 2023/24 marketing season, slightly less than the estimated record-breaking 57 million tons in the just finished 2022/23 season. This is still a high level compared to historical averages, but it may face some challenges from increasing domestic demand and competition from other exporters. Russia’s agriculture ministry forecasted that grain exports may range between 50 million tons and 55 million tons for the 2023/24 season.

Russia exports grain to more than 130 countries and expands export destinations every year. Far-abroad countries have the largest percentage (more than 90%). The CIS countries have only about 5% of Russian grain supplies (7.2% in 2019). The largest importers of Russian grain in the just-ended marketing season were Egypt with 11.92 million tons, Turkey with 10.25 million tons and Algeria with 3.26 million tons. These countries are likely to remain the main buyers of Russian grain in the future, as they face food security challenges and depend on imports to meet their domestic demand.

However, Russia may also face some competition from other major exporters, such as the United States, Canada, Australia and Ukraine, which may offer lower prices or higher quality products to attract customers. Moreover, Russia may face some trade barriers or political risks in some markets, such as sanctions, tariffs or embargoes. For example, in January 2021, Russia imposed an export tax on wheat to curb domestic inflation and ensure food availability for its population. This measure may reduce the profitability and attractiveness of Russian wheat for foreign buyers.

Russia is a key player in the global grain market, especially for wheat. It has achieved record-high production and exports in recent years, thanks to favorable weather conditions and high global demand. However, the outlook for the next season is less optimistic, as lower harvest estimates and higher domestic consumption may limit the export potential of Russian grain. Moreover, Russia may face some challenges from increasing competition and trade barriers in some markets. Therefore, Russia may need to diversify its export destinations and improve its product quality and reliability to maintain its leading position in the global grain market.

References:

https://adst.org/OH%20TOCs/Bannikov.Eugene.pdf

https://latifundist.com/rating/top-10-stran-proizvoditelej-pshenitsy-v-2019-godu

https://vvs-info.ru/helpful_information/poleznaya-informatsiya/eksport-zerna-iz-rossii/

Agriculture in Russia – statistics & facts | Statista
Russian grain exports in 2023/24 may slip from record-high 2022/23 – lobby group | Reuters
Grain Production and Export in Russia: Current State and ...
https://www.reuters.com/article/russia-grains-export-idUSKBN2YJ13A
https://www.rbth.com/business/332948-russia-leading-wheat-exporter
https://en.wikipedia.org/wiki/Russian_grain_exports