Russian West as cereals focal point on the grain map of Russia

The Baltic Grain Assembly–2024 took place on 4–5 July in Kaliningrad, bringing together the leaders of the national grain sector, heads of leading companies in the market of grain and grain processing products, logistics and stevedoring companies, and main agricultural producers from various Russian regions.

The experts discussed initial results of the finalized grain season, the wheat harvest quality in 2024, forecasts for Russia’s economic development in the near future, as well as the specifics of Russian exports and the main trends in key global markets.

Minister of Agriculture of the Kaliningrad region Artyom Ivanov spoke about the results of the 2024 agricultural season and specific features of local agriculture and emphasized the fact that despite the current challenging transport and logistics conditions, the region continued  to actively increase the export of grains, oilseeds, and the products of their processing.

“Thanks to the efforts of Kaliningrad farmers, today we are one of the leaders in terms of grain yields in Russia. According to the results of 2023, Kaliningrad became second (after the Krasnodar Krai) in barley yield (48.5 quintals/ha), fourth in winter wheat yield (58 quintals/ha) and seventh in total grain and legume yield in Russia (54.5 quintals/ha),” Artyom Ivanov highlighted.

“The Kaliningrad region is also the largest grain producer among the constituent entities of the Northwestern District: over the past five years, we have accounted for almost 60% of the gross harvest of the Northwestern Federal District, and wheat has become the main grain crop. Moreover, the region has significant potential for producing and processing oilseed crops, which, as an ideal predecessor to grains, increase their yield by 10% to 35%, depending on climatic conditions and growing technology,” the minister concluded.

Igor Shpakov, Consultant at the FAO Moscow Office, gave a detailed presentation on the situation in the global grain market and forecasting information on the main commodity-producing countries and regions based on the data from the FAO Agricultural Market Information System (AMIS).

He noted that the latest Global Report on Food Crises prepared with the participation of FAO showed a sharp increase in acute food insecurity.

“In 2023, around 282 million people in 59 countries and territories faced acute hunger. Globally, over the year their number increased by 24 million people. At the same time, armed conflicts, economic shocks and extreme weather events continue to be the main stress factors undermining food security,” the expert explained.

Speaking about the prospects for this season’s harvest, Igor Shpakov noted that the situation with the grain supply in the world would remain acceptable. "Currently, the total grain production is expected to amount to 2 846 million tonnes, dropping only slightly from the 2023/24 season’s record levels. Production volumes of staple grain crops such as corn and wheat are projected to decrease. The global volume of grain consumption this season will increase by 0.5% compared to last year, reaching a new record high of 2 851 million tonnes.

The global volume of grain trade in the 2024/25 season is expected to decrease by 1.3 %, reaching 481 million tonnes. A reduction in international trade in corn, wheat and barley will be the main reason for this trend. At the same time, sustainable growth in rice export contracts is forecast,” the FAO representative informed the audience.

Commenting on the situation with prices for staple agricultural crops, Igor Shpakov noted that the FAO Cereal Price Index averaged 118.7 points in May, which is 6.3 % higher than in April but still 10.6 points lower than the corresponding figure in May 2023.

FAO is convinced that free trade in grains is essential for the development of international cooperation in the agrifood area with the view of eradicating hunger and ensuring food security and sustainable agricultural development across the globe. It is obvious that promoting the effective functioning of agricultural markets is in the interests of all states, without exception. Therefore, FAO intends to continue to support and develop the AMIS system as an effective platform for ensuring food market transparency and coordinated actions during periods of market uncertainty, Igor Shpakov concluded.

Vladimir Petrichenko, Director of the ProZerno analytical company, presented a detailed report on the results of the grain year and emphasized that grains and oilseeds were the current driver of Russian agricultural exports.

According to him, the evaluation of the results of spring sowing for the 2024 harvest revealed that sowing in the Urals and the North Caucasus was quite insufficient. The total area under grains in Russia amounted to 45 757 thousand hectares, which is the lowest figure since 2014.

“In the coming season, grain balances in the country will be positive for both wheat and corn. We expect that the total wheat yield in Russia (excluding Crimea) will reach 83 million tonnes (91.5 million tonnes a year ago), while the export forecast is very high, 48 million tonnes (54 million tonnes last season), leading to a reduction in wheat stocks to a record 7.74 million tonnes (11.12 million tonnes a year ago).

Overall, really low grain stocks in the free market will be one of the features of the coming season, which will support a high probability of Russian export potential plummeting to 27% (by 19–20 million tonnes),” Vladimir Petrichenko summed up.

Andrey Klepach, Chief Economist at VEB.RF state development corporation, shared the forecast for the Russian economy development for 2024. According to him, in May 2024, industrial production in Russia increased by 1.8% compared to April, which became the highest monthly increase since December 2021.

“In the coming years, the budget deficit will be significantly higher than that envisaged by the authorities for the 2024–2026 period. By mid–2024, the rouble has strengthened significantly as a result of reduced imports. However, as oil prices decline and imports may recover, the exchange rate could weaken towards the end of the year.

The country’s economy continues to experience a labour shortage, and accelerated salary growth creates conditions for potential inflationary pressure and high loan rates. According to the VEB estimate, additional budget revenues for 2025–2030 from the introduction of a new tax system for individuals could amount to 3 trillion roubles. At the same time, by 2030, the share of working people whose income is taxed at a rate of 15% or higher will increase from the current 3.2% to 13.2%,” the VEB.RF representative said.

Andrey Klepach noted separately that in the foreseeable future, agriculture in Russia would show stable growth at the level of 2–4% per year (2.8% on average over the last 15 years). In the baseline scenario, the 2022–2030 production volume would increase by 29%.

“Despite the Bank of Russia’s policy of increasing the bank rate, we observe continued high rates of lending due to budget subsidies. The widespread introduction of advanced technologies (including introducing new varieties and hybrids of plants with increased yields and more productive breeds of livestock and poultry to the market), technological modernization and digitalization of production using resource-saving technologies, and expanding planted areas due to introducing reserve farmland into use will also be the additional growth factors in agriculture,” the speaker stated.

Inna Zaichenko, First Deputy Director, FSI Centre for Grain Quality Assurance, told the assembly participants that “in the 2023/24 agricultural year, 2.7 million tonnes of grain were exported from the territory of the Northwestern Federal District alone. The main destinations were the EU with 929 thousand tonnes (+70% compared to 2022/23), Africa with 483 thousand tonnes (69 times more than in 2022/23), and Latin America with 384 thousand tonnes (+32% compared to 2022/23).”

Ksenia Bolomatova, Deputy General Director, Joint Stock Company United Grain Company, presented a report on the development of the export infrastructure of the Russian grain market: expanding the capacity of grain terminals and increasing the capacity of railways.

The expert noted that Russia is a large grain producer and the world leader in wheat export with an annual production growth of 3% and an export potential increase of 5% per year. “If current yield growth rates are maintained, grain production in Russia may break new records. The existing port capacities for grain transshipment will not be enough to increase exports. In 2023, grain terminals of the deep-water ports of the Azov and Black Sea basin worked at their maximum capacity with the load of 97%,” Ksenia Bolomatova specified, adding that the efforts of grain industry participants are currently concentrated on the development of commodity distribution export infrastructure.

In addition, the assembly participants visited the grain terminal and elevator in the port of Kaliningrad. According to experts, the terminal capacities fully provide agricultural producers in the region with reliable channels for unhindered export of agricultural products to anywhere in the world.

The opinions and concerns expressed by the participants during the conference reflected the overall picture in the international grain market, which now has a somewhat wait-and-see attitude on the part of both exporters and importers. This is due to the challenging economic situation in certain countries, ongoing regional conflicts, and uncertain prospects for the harvest of staple crops in the 2024/25 season.

In Russia, due to return spring frosts and dry conditions in the southern regions, most industry representatives predict a reduction in yields and overall gross grain harvest this year. In addition, taking into account the economic situation, the risks of ensuring a continuous supply of high-quality production inputs for industrial agriculture are still at the forefront, especially in those areas where imports are traditionally high: seeds, equipment, and plant protection products.

FAO has a tradition of taking part in this expert and business forum. Presentations by the Organization’s representatives always generate interest from participants, and Russian experts rely on statistical data and forecasts from the AMIS system in their work.

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BACKGROUND

The Baltic Grain Assembly is one of the most important industry events, bringing together representatives of all agricultural regions of Russia, from Kaliningrad to the Primorsky Krai. This professional discussion platform was created to formulate development strategies for enterprises in the Russian grain industry and make effective management decisions through close business contacts and exchange of current market information. With the busy business agenda, key participants of the grain industry sum up the preliminary results of the ending agricultural season and make plans for the future. This year, over 150 participants attended the conference in person.