Global and domestic grain markets are entering the new agricultural season amid unprecedented instability, disrupting the traditional commercial strategies of holding companies.
Speaking at the «Where the Margin Is» industry conference, Dmitry Rylko, CEO of the Institute for Agricultural Market Studies (IKAR), emphasized that the key destabilizing factors for the industry were military and political tensions in the Strait of Hormuz and the Azov-Black Sea basin, as well as global El Niño climate anomalies.
The conclusion is clear: periods of price rallies in the current calendar year are directly linked to the security of port and shipping infrastructure, making long-term price forecasting extremely difficult.
The «Great South» Factor and Shrinking Regional Demand
According to the updated IKAR forecast, Russia’s gross grain harvest in the 2026/27 season will reach a strong 139 million tons, of which wheat will account for approximately 90 million tons.
The total wheat export potential is estimated at a baseline of 44.6 million tons, with the potential to increase to 46 million tons in the medium term.
At the same time, the domestic harvest geography is undergoing significant changes, posing challenges for macro-regions located far from ports:
Dominance of the Southern and North Caucasian Federal Districts.
The «Great South» is making a triumphant return to the export market. Due to high yields in the European part of the country, the southern regions’ share of total wheat exports will jump from a record low of 57% last season to a significant 72% this year.
Pressure on the Central and Siberian Regions.
The excessive surplus of cheap grain in the south is sharply reducing the interest of exporters and large processors in purchasing additional volumes from the Volga region, Central Russia, the Urals, or Siberia.
Localized crop failures.
The situation is further complicated by the fact that the Urals, Siberia, and neighboring Kazakhstan have experienced reduced harvests due to drought.
The Discount Trap and the Baltic Alternative
The margins of basic grain production in Russia still «leave much to be desired.»
Corn in the Central Federal District is showing some stability: its profitability has remained at a decent level due to a surge in export demand from Kazakhstan and Iran.
The oilseed triad (sunflower, rapeseed, and soybeans) still outperforms grain crops in terms of profitability, but last year’s collapse in soybean prices forced farmers to reduce their soybean acreage during the current sowing season.
The main market risk for wheat exports lies in the enormous discount.
Any escalation of geopolitical conflicts in the Azov-Black Sea basin prompts buyers to demand a discount on Russian grain relative to their Black Sea competitors, Romania and Bulgaria.
Historically, this discount has reached $40 per ton, and is currently holding high again – around $25 per ton.
Against this backdrop, with a ton of wheat in Klaipeda trading at $275, a strategic window of opportunity is opening up for Russian holdings in the Baltics.
