Russian grain prices fall below production costs as Black Sea exports effectively grind to a halt

Problems with grain shipments through Russia’s Azov-Black Sea ports are putting increasing pressure on the domestic market. Purchase prices for wheat and barley continue to decline and have already fallen below production costs in some regions. Russian traders are also reporting high uncertainty and, in some cases, effectively suspending purchases as they cannot determine at what price or via which routes they will be able to sell the grain.

The impact is particularly severe in southern Russia, which traditionally relies heavily on Black Sea exports. Following attacks on Novorossiysk, three major deep-water grain terminals — NZT, NKHP and KSK — halted operations. At the same time, freight costs have risen sharply, further undermining the economics of grain exports.

As a result, the export channel that normally absorbs a significant share of new-crop supplies has stopped functioning normally during the peak harvest period. According to SovEcon estimates, Class 3 wheat has fallen to RUB 11,500/t, Class 4 wheat to RUB 11,000/t, Class 5 wheat to RUB 10,000/t, and barley to RUB 9,700/t. These are the lowest levels since May 2024. Meanwhile, farmers’ representatives estimate wheat production costs at around RUB 14,000–17,000/t, meaning some producers are already being forced to sell grain at a loss.

Amid uncertainty over exports, trading activity in southern Russia has fallen sharply. Some buyers are reluctant to enter into new deals because port disruptions and higher freight rates make it difficult to assess future export prices. The pressure is no longer limited to wheat, with prices for other crops also declining, while farmers are postponing sales where possible in hopes that export conditions will improve.

However, a rapid recovery in shipments remains uncertain. Russia has rejected the possibility of a Black Sea ceasefire and sees no reason to revive the grain deal, while attacks on port infrastructure and merchant vessels continue. More than 90% of Russia’s grain export capacity in the Azov-Black Sea basin is currently out of operation, while shipping disruptions are forcing some cargoes to be postponed or cancelled.

If the situation persists, increasing volumes of grain will have to remain on the Russian domestic market just as the new crop is arriving. Redirecting Black Sea volumes to the Baltic, Caspian routes or railways cannot be done quickly without substantially higher logistics costs. Without a fully functioning export channel, excess domestic supply could continue to weigh on purchase prices and further squeeze producers’ margins.

Tags: Russia, export, grain