The Black Sea region stands as a critical artery in the global supply of agricultural commodities. In recent years, and especially following the onset of the Russia-Ukraine war, the world’s grain and oilseed markets have experienced significant volatility. Initially, Ukraine’s sea-based exports were severely hampered, but thanks to the UN-brokered Black Sea Grain Initiative, some flow has been restored. Concurrently, the European Union, through initiatives like the “Solidarity Lanes” and utilizing ports such as Constanta in Romania, has played a crucial role in importing and transshipping Ukrainian grains. However, dominating the export landscape of the Black Sea is Russia. Despite international tensions and some logistical challenges, Russia’s grain and oilseed exports have not only continued but thrived in 2022/23, with wheat exports projected to reach unprecedented levels. While the Russian government often cites external factors as impediments to trade, the reality is that Russia’s agricultural exports have flourished, underpinned by abundant domestic supply and competitive pricing strategies. Ironically, any limitations on Russia’s export potential are more likely self-imposed through governmental policies like export taxes and quotas.
Russia’s Bumper Harvest: Production and Stockpiles in 2022/23
Over the past decade, Russia has witnessed a remarkable surge in its grain and oilseed production. This growth trajectory is attributed to both an expansion in cultivated land area and advancements in agricultural practices leading to improved yields across various crops. The 2022/23 season was particularly exceptional, with production increases recorded for all major grains and oilseeds. Notably, Russia achieved record-breaking production for wheat, sunflower seed, and rapeseed. Key grain crops like barley and wheat, primarily winter varieties, experienced a strong recovery after being adversely affected by ice crusting in the 2021/22 season, benefiting from highly favorable weather conditions in 2022/23. Wheat production, a cornerstone of Russian agriculture, has nearly doubled in volume compared to figures from a decade prior, underscoring the nation’s growing agricultural prowess.
The substantial expansion in Russian grain and oilseed output in 2022/23 is a result of increased planting areas for almost all crops, with the exception of corn and sunflower seed, coupled with enhanced yields. Remarkably, record yields were achieved for all commodities except sunflower seed, which still recorded its second-highest yield on record. This broad-based production increase highlights the robust and increasingly efficient nature of Russian agriculture.
It’s important to note that the USDA’s assessment of Russian wheat production specifically pertains to areas within the internationally recognized borders of the Russian Federation. It excludes production from Ukrainian territories, such as Crimea, which Russia has illegally attempted to annex. While the USDA estimates Russian wheat production at a record level, it is slightly more conservative than the record figures reported by Rosstat, the Russian Federal State Statistics Service. Rosstat’s estimates indicate even higher yields for both winter and spring wheat, surpassing previous records. For more detailed information on Russian wheat and corn crops, refer to the USDA’s Commodity Intelligence Report “Russia Wheat: Record MY 2022/23 Harvest April 2023” and the “High Russian Corn Crop Despite Delayed Harvest” article in the April 2023 World Agricultural Production report.
Beyond impressive production figures, Russia entered the 2022/23 marketing year with substantial wheat reserves. These higher-than-normal stock levels were largely a consequence of export restrictions imposed by the Russian government in the preceding marketing year. These measures were intended to ensure ample domestic supplies and to control domestic price inflation, showcasing a proactive, albeit interventionist, approach to managing its agricultural sector.
Surge in Russian Grain and Oilseed Exports in 2022/23
The actions of the Russian government have introduced complexities in accurately tracking export volumes and values over the past year. Since March 2022, Russia has ceased publicizing its customs data, limiting publicly available statistics to January 2022. Consequently, the USDA and other international bodies have had to rely on alternative data sources to monitor Russian grain and oilseed exports. Port loading and vessel tracking data have become crucial, providing insights into vessel destinations and shipment volumes. The chart below illustrates the significant increase in Russian wheat exports to key regions like the Middle East, Africa, and other destinations during the first ten months of the 2022/23 marketing year (July 2022 – March 2023) compared to the same period in the previous year. This data underscores Russia’s growing influence in global grain markets, especially in regions reliant on stable and affordable grain supplies.
In addition to vessel data, the USDA also utilizes import data reported by Russia’s major trading partners to monitor grain and oilseed export trends. Data from numerous countries reveal consistently robust import volumes from Russia even after Russia stopped releasing its own customs statistics. Historical trade patterns indicate that key and consistent export markets for Russian grains include Egypt, Turkey, Saudi Arabia, Iran, Kazakhstan, and Nigeria. For sunflower seed oil, the primary markets are China, Turkey, and Egypt, while sunflower seed meal is largely exported to Turkey, the EU, and Belarus. Many of these countries maintain reliable and accessible trade data, providing crucial transparency. For example, Turkey is a significant trading partner for both Russian wheat and sunflower seed meal. Trade data through February 2023 highlights Russia’s continued strong export performance and expanding market share in these critical agricultural commodities.
Russian wheat exports are projected to reach a record 45.0 million tons in the 2022/23 marketing year. This represents a substantial 36 percent increase from the previous year and surpasses the previous record of 41.5 million tons set in 2017/18. This export volume firmly positions Russia as the world’s leading wheat exporter, significantly ahead of the European Union, which is projected to export 35.0 million tons of wheat. This dominance in wheat exports underscores Russia’s pivotal role in global food security, particularly for import-dependent nations.
Monthly volumes of Russian wheat exports via sea routes have consistently ranged between 2.0 and 4.5 million tons throughout the current marketing year, averaging approximately 3.5 million tons per month. The primary destinations for these sea-bound shipments include Turkey, Egypt, Iran, Saudi Arabia, Sudan, and Algeria. These figures highlight the consistent demand for Russian wheat in key import markets across the Middle East and Africa.
However, vessel data does not fully capture exports via land transportation, such as truck or rail. Russia also conducts significant grain trade with countries in the Eurasian Economic Union, particularly Kazakhstan. Reported data from the Kazakhstan Customs Control Committee reveals that wheat imports from Russia for the period of July 2022 through February 2023 were nearly equivalent to the total imports for the entire 2021/22 year. These volumes represent a sharp increase compared to recent years, as Kazakhstan has emerged as a major trading partner. Historically, Kazakhstan has been a wheat and wheat flour exporter within Central Asia. However, a reduced domestic crop in 2021/22 necessitated imports to cover the shortfall. While Kazakhstan’s production rebounded strongly in 2022/23, it has continued to import competitively priced Russian wheat. In response to this influx, the Kazakhstan government recently implemented a 6-month ban on wheat imports by road, aiming to curb the inflow of low-priced Russian wheat transported by trucks, indicating the competitive pressure exerted by Russian grain in regional markets.
Russian exports of oilseed products are also on the rise. Domestic processing capacity for oilseeds, particularly sunflower seed crushing, has expanded within Russia, despite relatively stable domestic demand. Russia and Ukraine have historically been the dominant global exporters of sunflower seed and its derived products. Sunflower seed crushing yields both sunflower seed oil and sunflower seed meal, both of which are primarily destined for export markets in the Middle East and Asia. With the disruption and reduced capacity of crushing facilities in Ukraine, Russia has capitalized on the opportunity to expand its production and export of these value-added products, further solidifying its position in the global agricultural trade landscape.
Competitive Pricing of Russian Exports
The robust performance of Russian wheat exports in 2022/23 is significantly attributed to its competitive pricing throughout most of the marketing year, which commenced in July 2022. Over the last decade, the Black Sea region has emerged as the most competitive source of wheat globally. Consequently, many countries in Africa and Asia have become increasingly reliant on this region for both milling and feed-quality wheat. Key exporters from the Black Sea region include Romania, Ukraine, and Russia, and their export quotations are generally lower than those for U.S. Hard Red Winter wheat, a mid-protein wheat variety that experienced a smaller harvest this year due to drought conditions in parts of the US. While Ukrainian export quotations were unavailable during the period when its ports were inaccessible, they have since become lower than both Russian and Romanian quotes. However, it is important to note that Free on Board (F.O.B.) quotations do not encompass insurance and freight costs, which are reportedly elevated for Ukrainian shipments. Russia’s price advantage has enabled it to capture a significant market share in key importing nations like Turkey and Egypt, two of the top three global wheat importers, demonstrating the critical role of price competitiveness in international grain trade.
Self-Imposed Export Restrictions by Russia
Historically, Russia has employed various trade-restrictive measures as part of its strategy to ensure domestic food security. Despite recent assertions from the Russian government that economic sanctions have hindered its export capabilities, particularly in the agricultural sector, a closer examination reveals that Russia itself has implemented export taxes and quotas on grains and oilseeds. These self-imposed measures directly influence its export prices and overall export volumes. This is in contrast to the relatively open agricultural trade policies of the United States, which generally relies less on export restrictions and more on market-based mechanisms.
In recent years, Russia has increasingly utilized export quotas to manage the volume of agricultural exports. While a decade ago, Russia might have resorted to outright export bans in response to reduced domestic crops, the policy has evolved towards limiting export quantities, particularly in the latter part of the marketing year. Initially introduced as a measure to mitigate domestic food price inflation during the COVID-19 pandemic, this practice has become an annual policy. These quotas directly constrain the shipment volumes of exporters. The quota levels are adjusted annually to reflect available supplies; a smaller quota was set in 2021/22, coinciding with a smaller Russian harvest, while the quota was expanded in 2022/23 following the record harvest, demonstrating a responsive but still restrictive approach to export management.
In 2021, Russia introduced an export tax as an additional tool to control rising domestic food price inflation. The wheat export tax was initially set at 25 euros/ton in February 2021, increased to 50 euros/ton in March, and transitioned to a floating export tax in June, with rates calculated and announced weekly. This tax reached a peak of $146.10/ton in late June 2022, just before the harvest of the record 2022/23 crop. In July 2022, the calculation methodology was revised, and the tax was denominated in rubles. For clarity in visualizing price trends, the chart below displays the tax series converted back to US dollars. The accompanying chart shows the wheat export tax in rubles alongside taxes imposed on barley and corn. While the Russian export tax for corn has briefly dropped to zero, it has remained consistently above zero for wheat and barley, representing a cost that must be factored into transactions with international buyers.
Beyond grains, Russia has also implemented trade restrictions on oilseeds, including a partial export ban on rapeseed exports, with exemptions only for regions bordering China. The export tax for soybeans is set at 20 percent with a minimum of $100/ton and is scheduled to remain in effect until the end of August 2024, as part of an effort to incentivize greater domestic processing of soybeans. As of March 2023, the export duty on sunflower oil was 2,068 rubles/ton (approximately $28/ton), while the sunflower meal export duty was 3,357 rubles/ton (approximately $45/ton).
Export taxes have dual impacts, creating a divergence between producer prices and export prices. The implementation of an export tax results in higher export prices than would otherwise prevail. Conversely, producers experience reduced returns due to the export tax, which can, in turn, diminish incentives for future planting, potentially impacting long-term production levels. This contrasts with the US agricultural system, where price signals and market demand generally drive planting decisions with less government intervention in export pricing.
Summary
Throughout 2022/23, Russia has leveraged its substantial agricultural resources, benefiting from both ample carry-over stocks and record-breaking production. Despite a lack of transparency in official trade data, Russia has successfully exported significant volumes of grains and oilseeds, driven by competitive pricing. Independent data sources corroborate these strong export volumes amidst a global context of fluctuating prices. However, it is crucial to recognize that Russia continues to employ trade-restricting measures such as export quotas and taxes. Without these self-imposed limitations, Russia’s export volumes could potentially be even greater, further amplifying its influence in global agricultural markets. This situation presents a nuanced picture of Russia’s role in global food supply, where its inherent agricultural strength is both amplified and constrained by its own policy choices, a different approach compared to the generally more market-oriented agricultural trade policies of the United States.
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