Grain production profitability in Russia is declining rapidly

Russia’s agricultural sector is entering the new season with rising production costs, weakening crop prospects, and declining profitability. Leading Russian analytical firms have already begun revising their grain production forecasts downward. SovEcon cut its forecast for total grain and pulses production from 137.4 mln tons to 135.2 mln tons, while ProZerno lowered its estimate from 137.4 mln tons to 134.7 mln tons. At the same time, wheat production is now projected at 86.9–88.9 mln tons, depending on the analyst.

One of the main reasons behind the lower forecasts is a reduction in planted area. Wheat acreage is estimated at just 25.8 mln ha, the lowest level since 2014. Spring wheat is of particular concern, with planted area expected to fall below 10 mln ha for the first time in decades. Some Russian experts have already described the situation as “catastrophic” for the industry.

Weather-related challenges and fuel supply disruptions are adding further pressure. Harvesting began about a week later than usual, while diesel prices in some regions exceeded RUB 100 per liter in late June due to temporary shortages. Although the government says it has taken measures to stabilize the fuel market, farmers continue to report supply problems that could slow harvesting and affect grain quality.

Meanwhile, even the relatively strong initial yield figures offer little reason for optimism. Analysts note that comparisons with last year are misleading because of the low base effect, as southern Russia suffered from severe drought during the early stages of the 2025 harvest. Current yields of winter barley and wheat in several regions are already below last year’s levels, reinforcing expectations of further downward revisions.

The economics of grain production remain another major challenge. High fuel, logistics, and input costs coincide with relatively weak global grain prices. Additional pressure comes from softer demand among key buyers of Russian wheat, including Turkey, Egypt, and North African countries. This is reducing export prospects and further squeezing profit margins.

According to Russian consultants, even if wheat prices rise slightly by the end of the year, the increase will not be enough to offset higher production costs. They expect grain exports to remain only marginally profitable, with another downward revision of both production and export forecasts possible by the end of July.

Tags: Russia, barley, wheat, margin, crop forecast