Fuel crisis makes grain exports from central Russia unprofitable

Russia’s fuel crisis is rapidly increasing the cost of trucking grain, putting exports from the country’s central regions at risk. According to Russian farmers, transportation costs have already risen from the equivalent of “4-5 distance units” to “6-7” and could reach “7-8” during the peak harvest period. This is significantly undermining the economics of delivering grain to Black Sea ports.

At current freight rates, trucking grain about 600 km to the ports of Rostov or Azov has become economically unviable. While higher export prices previously offset transportation costs, farmers can now earn considerably more by selling grain to domestic buyers instead of shipping it for export.

According to farmers’ calculations, with wheat purchase prices unchanged, delivering Class 3 wheat to export ports can now reduce returns by nearly 2,000 rubles/ton ($26/t) compared with selling on the domestic market. As a result, transporting grain by truck to ports is becoming unprofitable for farms located more than 300 km from the coast.

Analysts note that the problem extends far beyond individual regions. Even with strong global demand for Russian grain, soaring transportation costs could significantly limit export volumes, particularly from the Central Federal District, one of the country’s largest grain-producing regions.

Amid an ongoing diesel shortage and rising logistics costs, transportation has become one of the biggest risks for Russia’s grain exports in the new marketing season. Unless the fuel situation improves before harvest reaches its peak, part of the crop could remain on the domestic market or be sold at substantial discounts.

Tags: Russia, logistics