Three critical warnings for grain markets from SovEcon’s Andrey Sizov:

18 October 202112 min reading

High prices, global food insecurity and smaller Russian wheat crops

"With such substantial state intervention, if export taxes stay, the consequences will be very grave for the Russian grain industry"

“I think 2022 could be a more challenging period. We know more or less now how to deal with the COVID. But we have substantially higher prices for food grains, substantially higher wheat prices. While we have strong demand, there are some problems with the supply of wheat in the Northern Hemisphere. We also have some problems with freight and containers…I am afraid that big problems are ahead of us. In real terms global food prices just have returned to all-time highs, as per FAO. We saw similar high food prices at the end of 2010. The Arab Spring started in 2011”

Andrey Sizov
CEO of SovEcon

Adverse weather and drought hit wheat production in North America and Russia. With the concern about shrinking production prospects and tight supplies in the major exporters, wheat prices increased further in September. Importing countries such as Algeria, Turkey and Pakistan have recently bought large amounts of wheat. However,  wheat importers are worried because of the prices. How much will wheat export prices rise? Which factors will drive the markets?

How is the wheat supply outlook for Russia, the world's largest wheat exporter? We asked these questions to Andrey Sizov, managing director of Russian agriculture consultancy SovEcon, one of the most reliable analysts of the grain markets. SovEcon is the oldest research firm focused on Black Sea grain markets providing consistent data and accurate analysis of the region helping funds, traders, buyers and miller to trade better or manage their risks. (More info:

Stating that bad weather and Russia’s wheat export tax affected the wheat production negatively, Sizov expects that Russia will produce 75.5 million tonnes of wheat this season, below-average for recent years. “We also expect a substantial decrease around 1 million hectares decrease of winter wheat because Russian farmers’ margins are falling due to the export tax. I'm afraid if taxes stay, this trend will continue,” he warns.

Also sharing his price scenario for the current season, Sizov expects wheat prices at least 320-$330 per tonne. “We could see prices rallying to as high as $350 per tonne,” he adds.

Mr. Sizov, in your article published in Financial Times on 26th September, you said the Russian government's move to tax grain exports could harm its leading position in the grain market. What are the reasons for this warning? What signs do you see in this regard?

The answer to the first question is relatively simple. We have a very unfavorable setup for farmers currently. The grain prices are being regulated, there is a threshold. It's $200 per tonne for wheat. For barley and corn, it's $185 per tonne. And everything above is being taxed at 70%. So for example, if the FOB price is at $300 per tonne, -like it is now roughly-, it implies that around $70 will be taken out of the farmer's pocket. So, it also implies that farmers receive only 30% of price increase in the global market. So grain prices and also oilseed prices have been regulated heavily (Sunflowers, second cash crop are taxed at 50%!). There is a cap and all major crops’ prices have been regulated. At the same time, input prices are not being regulated. As we see all over the world, fertilizer prices, chemicals and machinery prices…all agricultural inputs are going up and up. Fertilizer prices more than doubled already. This implies that costs are rising fast, but at the same time prices for crops have been more or less fixed. So that's why we expect to see -and I think it's happening already- a fast decrease of margins for Russian farmers. And as a result, it will inevitably lead sooner or later to a decrease in production or to switching towards a crop slide or in some cases they will just cut planted area.


As per your second question, what are the indicators? What can we say now? We have relatively modest wheat crop this year. Our most recent estimate is 75.5 million tonnes, which is roughly 10 million tonnes below the previous year. This is already below-average crop for recent years. The biggest reason no doubt is unfavorable weather in the summer, and even in spring in some places, and that held yield substantially because of lack of moisture.