The Kremlin steps in to save the grain market

Russia is trying to get stalled grain exports moving again with a package of emergency measures. However, the proposals from the Kremlin are being met with scepticism from the Russian agricultural sector. Ukraine is also facing limited export opportunities. At the same time, lower harvest forecasts in the EU and drought in the US are creating additional tension in the market.The September wheat contract on the Matif closed yesterday down €1.50 at €234.50 per tonne. On the CBoT, wheat continued to rise and the September contract closed 12¼ cents higher at $7.42¾ per bushel. Corn fell 3¾ cents to $5.10¼ per bushel. Soybeans gained 2¼ cents to $12.56½ per bushel.Ukraine's attacks on Russian oil refineries and distribution centres of online retailers are making the headlines more often than the attacks on and around the Black Sea. Because Russian grain exports via the Black Sea are now virtually at a standstill, the Kremlin feels compelled to take major measures to keep the agricultural sector afloat. Moscow wants to temporarily abolish the export levy on grains, subsidise transport by rail, make additional loans available to farmers and process surplus grain into animal feed.However, the sector is reacting sceptically to the measures the Kremlin wants to take. According to Arkady Zlochevsky of the Russian Grain Union, alternative export routes are very costly and cannot handle the volumes that currently go through the Black Sea and the Sea of Azov, he told Reuters. Of the approximately 60 million tonnes of grain that Russia exports, 70% goes via the Black Sea and the Sea of Azov. Transporting grain not to the southern ports but to the Baltic Sea ports costs $30 to $50 per tonne extra, according to Zlochevsky. At best, about half of the grain can be exported via other routes. If the export problems last until the end of the year, that would be a catastrophe according to Zlochevsky.Perfect stormThe fact that Russia has a relatively good grain harvest this season worsens the problems on the domestic market. The Russian farmers' lobby is asking the Ministry of Agriculture to reduce the area planted with winter grains. A smaller sown area is the only way to get rid of the surpluses on the Russian domestic market, according to the growers. The ministry does not agree with that reasoning. A reduction in the area to be sown is absolutely a threat to food security, because the process will be virtually uncontrollable, a ministry spokesperson told Reuters.The Ukrainian Ministry of Agriculture expects less winter wheat to be sown in Ukraine this autumn, minister Taras Vysotskyi said. Part of that is due to the export problems, but another factor is that it is dry in southern Ukraine.Exports are also a major problem for Ukraine. In August, according to Vysotskyi, 822,000 tonnes of grain were exported. That is only 21% of the potential volume. Exports are almost entirely via the Danube and by rail. Exports through the ports of Odessa are effectively at a standstill. That is especially problematic for exports to the traditional export markets in Africa and Asia. But the markets can quickly shift back to Ukraine once our ports are open, said Vysotskyi.Smaller harvest in the EUIn the EU, this year's wheat harvest turned out 9% lower than in 2025. That is at least the estimate of Argus. The total European harvest is estimated at 161.5 million tonnes. In France, 30.8 million tonnes of wheat were harvested this season, according to the market intelligence firm. That is 7.6% less than last year.In the US, it is getting drier, according to the latest drought monitor. The wheat regions in particular are short of water. Of the northern spring wheat regions, 80% are affected by drought compared with 63% last week. This has little effect on yield, however, as the harvest is already well advanced. There is more concern about winter wheat. Of that crop, 56% is in a drought area compared with 54% last week. This points to a dry start to the new season if the seed drills can go out again in the coming weeks.