Export duties on wheat in Russia have lost their effectiveness

Export duties on wheat in Russia are effective only in the short term, while in the long run they distort market mechanisms and weaken incentives for production. This conclusion is outlined in a study published in the academic journal Economic Policy.

According to the authors’ estimates, during the period when the grain damper was in place in 2021–2024, revenues of grain producers in Russia fell by about 200 billion rubles, while exporters’ margins declined by nearly 370 billion rubles. At the same time, gross wheat harvests decreased, indicating a weakening of the sector’s production potential.

The study analyzes the relationship between export and domestic prices, as well as the impact of floating export duties in the presence of a wholesale link in the wheat supply chain. The calculations took into account gross output, demand, exports, and domestic prices, allowing the researchers to quantify the effects of the damper mechanism.

The authors acknowledge that at the initial stage export duties had some positive effects: domestic prices were 10–25% lower than potential levels without duties, and domestic demand increased by more than 10 million tons. However, over time these benefits faded, giving way to negative consequences in the form of reduced production and exports.

In particular, during the years the damper was in force, wheat exports fell by more than 12 million tons, while profitability and investment attractiveness of the sector deteriorated. In addition, the system of returning funds to farmers through subsidies proved insufficiently effective: over four years, direct subsidies amounted to about 40 billion rubles, whereas budget revenues from wheat export duties reached 687 billion rubles.

Another key conclusion of the study is the gradual weakening of the regulatory impact of export duties on the domestic market due to shrinking carryover stocks. In this context, the authors consider a phased abandonment of the grain damper, alongside a revision of grain market regulation policy, to be the most rational scenario for the state.

Tags: wheat, margin, duties, Russia, export