In a decisive move to address domestic food inflation and dwindling wheat stocks, Russia has announced a significant reduction in its wheat export quota for the latter half of the 2025 marketing year. The new quota, set at 11 million metric tonnes (MMT) for the February 15 to June 30 window, marks a sharp decline from the 29MMT allowed during the same period this year.
Alongside this, export duties have been raised by over 18%, or approximately US$6 per metric tonne, effective December 4, 2024. These measures underscore Moscow’s focus on stabilizing its domestic market amid record-breaking wheat exports earlier this season despite a smaller 2024 harvest.
Russia Tightens Control Over Wheat Exports
Deputy Prime Minister Dmitry Patrushev emphasized the government’s strategy:
“By tightening controls on agricultural exports, we aim to prioritize domestic market supplies and stabilize prices.” The updated export policy notably sets zero quotas for barley, rye, and corn, underlining a comprehensive approach to preserving grain stocks for domestic use.
Historically, Russia introduced grain export quotas in 2020 and has since adjusted these limits annually. While the 2024 quota initially stood at 24MMT, it was increased to 29MMT mid-year to accommodate robust export demand. However, this year’s reduced quota reflects a significant shift, driven by depleted farm stocks and rising domestic economic pressures.
A Tale of Record Exports and Shrinking Stocks
From July to November 2024, Russian wheat exports surged to an unprecedented 26.7MMT, slightly exceeding last year’s record for the same period. However, this rapid pace has drained on-farm stocks, which SovEcon reported as 20% lower year-on-year as of November 1, at just 21.8MMT. Stocks in the Southern Federal District, Russia’s top exporting region, were particularly strained, plummeting by 26% compared to the previous year.
Global market players have been closely monitoring these developments. SovEcon’s revised export forecast for the 2024/25 season now stands at 44.1MMT, down 1.8MMT from earlier projections. This would represent a substantial drop from the 2023/24 record of 52.4MMT but remains above the five-year average of 40.9MMT.
Implications for Global Wheat Markets
The tighter export quota is poised to reshape global wheat trade dynamics.
With the USDA’s November update projecting Russian exports at 48MMT, a downward revision is now inevitable. This opens a supply gap likely to intensify competition among other major exporters, such as the European Union, Australia, and Argentina. North African and Middle Eastern importers, heavily reliant on Black Sea wheat, may find themselves scrambling for alternatives.
Low global wheat prices have complicated the situation. Russian farmers, faced with poor yields and financial strain, have been incentivized to sell their stocks rather than hold out for potential price increases. The Central Bank of Russia’s recent interest rate hike to 21%, coupled with short-term deposit rates as high as 25%, has further encouraged liquidation of on-farm inventories, providing a guaranteed return that eclipses the risks of market volatility.
Economic Pressures Shape Future Planting Decisions
Adding to the uncertainty, the Russian ruble’s depreciation has hit new lows, trading at over 113 to the dollar as of late November 2024. While a weak ruble boosts profitability for exporters, it exacerbates inflationary pressures on domestic inputs. Farmers, grappling with low wheat prices and high production costs, are increasingly pivoting towards alternative crops such as peas, lentils, and sunflowers. This shift may further constrain wheat supply in the coming years.
Looking Ahead
Russia’s decision to slash its wheat export quota signals a critical juncture for global grain markets. While the immediate goal is to stabilize domestic food prices, the ripple effects will be felt worldwide. Import-dependent nations must adapt to a more constrained supply landscape, and exporters in other regions are poised to step in to fill the void. As the 2025 marketing year unfolds, the interplay of policy, market dynamics, and geopolitical tensions will remain at the forefront, shaping the future of global wheat trade.
Disclaimer: The views expressed in this article are solely those of the author, who has spent over a decade analyzing the grains and oilseeds markets. With a deep understanding of global agricultural market dynamics, the author offers insights based on extensive experience in trade analysis and market trends. While every effort has been made to ensure the accuracy of the information presented, the views shared are subjective and reflect the author’s perspective on the evolving market.