Russian Union of Grain Exporters and Producers Chairman Dmitry Sergeyev: Market conditions for grain exporters extremely tense now
Dmitry Sergeyev
Photo: Press-office
The participants of the 4th Russian Grain Forum, which took place in Sochi, discussed the development of the grain industry in the Russian agricultural sector in terms of both production and exports. Russia, which has traditionally held a leading position on the global wheat market, is cutting supplies this year, while export transactions are losing profitability.
Russian Union of Grain Exporters and Producers Board Chairman and United Grain Company (OZK) CEO Dmitry Sergeyev told Interfax in an interview about the reasons for such a trend, what areas have the potential for increasing exports, and what role the BRICS grain exchange could play in boosting trade.
Q.: Russia is expected to reduce its grain exports this farming year, but it will be able to retain its leading position on the global wheat market. What, in your opinion, are the reasons for the reduction in supplies, apart from the decline in last year's harvest?
A.: There is a month left until the end of the current season, and we can say that the total grain exports will be lower than those of the previous two record-breaking agricultural seasons. However, it is important to note that exports remain at a high level. Up to 53 million tonnes are expected to be delivered to international markets, which will be the fourth highest result in the modern history of Russian grain exports.
Let me remind you that amid record harvests in 2022-2023, more than 60 million tonnes of grain were exported in the 2022/23 season, with more than 70 million tonnes in the 2023/24 season.
Even given the lower exports, Russia will remain the leading wheat supplier, leaving its closest competitor, the European Union, far behind.
Speaking about the reasons for declining supplies, we can emphasize two key factors. Firstly, it is lower demand on the part of some key buyers of Russian grain compared to previous seasons. For instance, Turkey's imports will total only 3.5 million tonnes at the end of this season. This is almost a threefold reduction compared to that of a year earlier, when Turkey imported 9.4 million tonnes. Iran slashed its wheat purchases from 2.6 million tonnes last season to 1 million tonnes this season.
Second, there is strengthening of the ruble, which started in January 2025. In the first half of the season, which was between July and December 2024, there was an upward trend, albeit with fluctuations, in prices on the global wheat market, which overlapped with a gradual weakening of the ruble. This allowed exporters to raise purchase prices that created favorable conditions for agricultural producers.
However, since the start of this year, the ruble began to strengthen, as in January, the dollar exchange rate was 100.5 rubles, in April it fell to 83.4 rubles. Against this backdrop, exporters had to lower their purchase prices. This, for obvious reasons, did not meet the expectations of farmers, who faced rising costs, lower yields for two years in a row and lower grain stocks.
Q.: Are the 'hidden sanctions' against Russian grain, which have been so much talked about in recent years, among them too? Do they continue to play a negative role?
A.: Generally speaking, Russian exporters have already successfully adapted to the new reality, despite the remaining difficulties in terms of financial logistics.
Q.: The geography of grain exports has recently expanded, and our wheat has even reached Zanzibar. In what other export destinations do you see prospects for increasing grain shipments?
A.: If we talk about the potential, it is primarily Turkey and Iran. Back in winter, our union voiced its expectations that these countries will be more active on the market in the new season. The first confirmations of these forecasts have already appeared, as Turkish and Iranian buyers have recently become more active on the market, and analytical reports with the first estimates of grain balances in the 2025/26 season [starting July 1] show that Turkey is expected to increase its wheat imports to 7.5 million tonnes, which is 4 million tonnes more than in the 2024/25 season, while Iran is expected to raise its wheat imports to 2.5 million tonnes, which is 1.5 million tonnes more.
Overall, a certain increase in demand is currently expected from nearly all key wheat importers - Egypt, Indonesia, Bangladesh, Yemen and others.
In essence, the main export destinations for Russian grain crops in the current season are traditional - Egypt, Turkey, Iran, Bangladesh, and Saudi Arabia. At the same time, Turkey and Iran remained among the top three importers, despite lower demand, which means that there was no question of a complete cessation of imports. Supplies to Nigeria, Morocco, Lebanon, Sri Lanka, and South Korea rose sharply.
If we analyze the trends of the last two or three years, we should note achievements in a number of areas. These include Algeria, Kenya, Nigeria, Libya, Morocco, Tunisia, Tanzania and Sudan in Africa, Israel, Yemen, the United Arab Emirates and Oman in the Middle East, as well as Indonesia, Vietnam and Sri Lanka in Asia. Mexico is among the others too.
In recent seasons, shipments to Algeria, Israel, Kenya, China, Libya and Morocco have increased manifold or even by an order of magnitude. The first shipments were made to Djibouti, Gambia, the Central African Republic, and Eritrea.
Q.: What has the experience of expanding supplies to African countries shown? How promising and effective is this segment of trade?
A.: The African continent is a major importer of wheat, purchasing around 60 million tonnes per year. This is a fast-growing and clearly promising market. If 20 years ago, African countries imported up to 30 million tonnes of wheat, including flour, 10 years ago, it was already 50 million tonnes. If the long-standing dynamics are maintained, the level of 70 million tonnes may be surpassed within the next five years.
Russia is a reliable exporter of wheat to countries in Africa. Over the last six marketing seasons, it has increased exports by a third, from around 15 million tonnes in the 2018/19-2020/21 seasons to 20 million tonnes in the 2023/24 season. We currently occupy a third of the entire African wheat market, exporting to 40 African countries overall. The most notable success of recent years was the sharp increase or start of exports to Algeria, Libya, Kenya, Morocco, Tunisia, and Tanzania.
The African grain market held many prospects in light of fast population growth, the growing middle class and increasing purchasing power. Although, it would be a mistake to refer to Africa as a monolith, as it has five sub-regions, which differ significantly from each other. Therefore, Russia is developing its relationship with different African countries in different ways. With northern African states such as Egypt, Algeria and Tunisia we have established a direct conversation and we have a clear understanding of their needs and our opportunities. On the other hand, there are some other countries in central and southern parts of the continent, which often lack sufficient infrastructure and are logistically hard to reach - we have to interact with them via international traders.
Increasing grain exports to Africa require a comprehensive approach encompassing logistics, storage and processing. We are already taking certain steps in this direction.
Q.: Export profitability this year, as some experts wrote, "is in the sharply negative territory." Are there any fears that the group of exporters may shrink drastically? How will this affect export shipments? Will the situation change in the new farming season?
A.: The market conditions for exporters are extremely tense, and companies that have internal reserves to cut costs and make their businesses more efficient can continue operating in such conditions. These are primarily market players that have their own infrastructure - grain elevators, storage facilities, vehicles and rolling stock, fleet, and handling capacities. They have an opportunity, which is unavailable to ordinary trading companies, to reduce costs along the entire chain and make use of economies of scale.
As for the consolidation of major export flows among a relatively narrow range of exporters, this trend has been seen for quite a long time and is linked to increased market transparency and the need to constantly work on competitiveness on the global markets.
However, this does not mean that new participants are not allowed to enter the grain export market, as more than 300 companies supplied grains in 2024. New participants specializing in one or another niche of the grain market are emerging almost every season.
Q.: The establishment of the BRICS grain exchange was approved at the top level - at the association's summit in Kazan last fall. How is work on creating this trading platform proceeding? Are specific mechanisms and tools already under discussion? Are there any concerns that the process is being protracted?
A.: Let me remind you that the initiative to create such an exchange was originally proposed by the Union of Grain Exporters and Producers, then supported by Russian President Vladimir Putin and endorsed by the business communities of the association's member states.
The BRICS includes the world's largest producers and consumers of grain. For example, Russia accounts for 20%-25% of global wheat trade, while Brazil has become the world's leading exporter of corn in recent years. China is not only a major producer of grain crops, but also the largest importer of wheat.
The new trading platform will allow BRICS countries to develop independent and fair price indicators within the association, which will help provide a more objective valuation of agricultural products on the global market. The creation of the grain exchange will strengthen global food security.
Undoubtedly, the creation of an international exchange is a complex process that requires significant effort from all project participants - regulators of exchange infrastructure, financial institutions, government authorities responsible for financial and agricultural policy, and sectoral communities in all BRICS partner countries.
There is a difficult task ahead of coordinating numerous conceptual and practical issues, such as the outline of priority commodity groups, trading regimes and rules, procedures for the admission of goods and participants, methods of settlement, and many other issues. As part of the 4th Russian Grain Forum currently taking place in Sochi, a number of meetings with foreign partners were held to discuss the details of establishing the grain exchange.
Active work on the project is underway by all interested parties. We expect that the first fundamental agreements among BRICS partners on the conceptual model of the exchange will be included in the declaration of the BRICS Summit in Brazil [to be held July 6-7, 2025].
Q.: As experts say, European exporters have lost some ground in global grain trade recently, while suppliers from the southern hemisphere have strengthened their position. How could this change the global 'export picture' and affect Russian supplies? Could this be linked to the fact that some Latin American countries, which used to be among the buyers of Russian grain, have switched to suppliers from Argentina, for example?
A.: The global export picture is not static and changes from season to season depending on grain production volumes in both importing and exporting countries.
Indeed, in the 2024/25 season, the European region (the EU, Russia, and Ukraine) faced a slump in production and, respectively, wheat exports, while exporters in the southern hemisphere, primarily Australia and Argentina, had a good harvest. As a result, European grain was relatively uncompetitive on the Asian market. At the same time, we should not forget about major producers and exporters from North America - the United States and Canada, which compete with European grain on some markets.
Next season, wheat production in Europe is expected to increase, while in the southern hemisphere it may decline. Therefore, a certain redistribution of global grain flows is probable. This is a natural process, which is determined by the balance of supply and demand in specific regions and countries.
Q.: At what stage is the modernization program for the Novorossiysk grain terminals, which play a leading role in Russian grain exports? How much has the capacity of the terminals expanded at this stage of modernization? How much will the throughput capacity increase upon completion of all projects?
A.: The record grain exports seen in the last two seasons clearly showed that the decision made a few years ago to expand the handling capacity of the Novorossiysk grain terminals was well timed.
The terminals showed a record performance in the 2023-2024 agricultural season - with a total capacity of 22.6 million tonnes, they handled 24.6 million tonnes. The Novorossiysk Grain Plant (NKHP) handled 8.3 million tonnes with a design capacity of 7.1 million tonnes, NZT handled 7.1 million tonnes with a capacity of 6.5 million tonnes, and KSK handled 9.2 million tonnes with a capacity of 9 million tonnes.
It is clear that the current port capacity will not be sufficient to meet the president's goal of boosting Russian agricultural exports. After all, port infrastructure should have a reserve for handling capacity both in the event of inability to ensure maximum shipment rates year-round due to objective factors, such as weather, and in the event of possible surges in demand for various reasons.
As part of the International Cooperation and Exports national project, work is underway to consistently develop export infrastructure, which includes the port's grain handling capacity. The total capacity of the three grain terminals in Novorossiysk (NKHP, NZT, and KSK) is expected to grow substantially in the years to come. In particular, the NKHP and NZT terminals will expand their capacity by 4.5 million tonnes each through the implementation of the joint New Pier project. The throughput capacity of the KSK terminal reached 10.5 million tonnes in 2024, with plans to increase its capacity to 15 million tonnes.
Therefore, the throughput capacity of the Novorossiysk port in terms of grain cargo handling could increase more than 1.5-fold from 24.1 million tonnes to 37.6 million tonnes by 2028.
Q.: The Union of Exporters changed its name to the Union of Grain Exporters and Producers in 2024 and expanded its scope of activities. What was the reason for this transformation? What are the plans for developing the organization until 2030?
A.: Since 2019, the Union of Grain Exporters has facilitated interaction between government agencies and grain exporters, helping the participants respond promptly to external challenges amid high volatility on the global market.
In February 2024, the president set new targets for the Russian agricultural sector, which imply the production to increase by at least a quarter by 2030 compared to 2021, and exports by 50%. For the grain industry, this means that the gross grain harvest should reach at least 170 million tonnes per year by 2030, with exports reaching at least 81 million tonnes. To achieve these targets, it is essential to consolidate all key players on the grain market, including agricultural producers, exporters, logistics operators, and specialized port terminals. Therefore, a decision was made to expand the scope of the union's activities.
This year, the union accepted 13 new members - grain producers, including a number of major agricultural holdings, as well as a financial institution that provides market participants with the required agricultural equipment.
The union currently has 50 members, and we expect large and small agricultural producers from all regions of the country, road and rail transport operators, ship owners specializing in grain shipping, as well as sea and river port terminals, and logistics operators to join our ranks in the near future.
To achieve new goals set for the grain industry, the union has drawn up a development strategy for the association until 2030. Our board adopted it in May. The key areas include efforts in collaboration with the scientific community to create conditions for developing marginal crop production and making Russian grain crops more competitive on the global grain market, especially by developing a cargo-handling export infrastructure.
We will also focus on improving the regulation of the Russian grain market. This includes the elaboration of state support measures both in Russia and within the Eurasian Economic Union, improving the mechanism for calculating export duties, and developing exchange trading in Russian grain.
Our last priority, not in terms of importance but in numerical order, is to promote Russia's image as a leading grain supplier and a reliable partner. As you can see, we have a lot of work ahead of us.
