Experts say Russia’s farmers face bigger, more systemic problems than recent bad weather and may be at a tipping point after three years of relentless inflation, plummeting crop prices, government interference, and limited access to quality seeds and chemicals. Russian insiders say there is much more to the story, with several factors culminating in what could be Russia’s demise as one of the world’s most important breadbaskets.
Weather Challenges: Russia’s wheat production peaked in 2022/23 at a record 92 million metric tons (MMT). Production last year fell to 81.6 MMTs, and this year looks to be back around 85 MMTs. Russian grain consultancy SovEcon has become a bit more optimistic, recently lifting its forecast for the 2025 wheat harvest to 87.2 MMT. In Russia’s southern Rostov Region, the heart of the country’s wheat production, farmers have faced increasingly erratic weather in recent years, including unprecedented heat waves, drought, and unseasonable cold snaps. However, insiders point out that Ukraine, which neighbors the Rostov Region and shares nearly the same climate, has seen production increase this year.
Farmer Finances: Similar to farmers in the US, Russia’s farmers are contending with plummeting crop prices. However, Russian growers face additional headwinds, such as tougher lending standards for prohibitively expensive operating loans, which carry interest rates exceeding 25%. The Russian Agricultural Bank reportedly isn’t even offering new loans as the country has shifted most of its resources to the war effort against Ukraine. Experts say many banks won’t lend to the ag industry due to the inherent uncertainty of farming. A growing number of Russian farmers are pulling back from wheat production as profits dwindle — and in some cases, turn negative — according to Russian Grain Union President Arkady Zlochevskiy. According to Zlochenvskiy, “Investment activity in the wheat production has fallen to zero.”
Government Price and Trade Controls: The Russian Grain Union has also long argued that government policies, including state price regulation on the domestic market and duties on grain exports, has undermined business profitability. The export duties have become critical to the government’s finances. In 2024, grain export duties raised an estimated 133.9 billion rubles ($1.6 billion), and are forecast to rise to 187 billion rubles ($2.37 billion) in 2025, according to local analysts. The government’s domestic price controls, meanwhile, are essentially forcing farmers to eat the more than +20% increase in production costs over the last year. Wheat prices, however, remain flat. Russian officials are more concerned with keeping domestic food costs low than with farmer livelihoods, though. Russia’s Ag Ministry is now pitching a plan that would set long-term prices for essential food products so as to curb food inflation. The plan would see a government “troika” – the Ministry of Agriculture, the Ministry of Industry and Trade, and the Federal Antimonopoly Service – determine “reasonable” prices and sign three- to five-year contracts with producers. If “reasonable” price levels are set below the cost of production, experts warn that the country’s farmers will turn to other crops, or give up farming altogether.
Asset “Redistribution”: Following Russia’s illegal invasion of Ukraine, it became untenable for most Western companies to continue doing business in Russia. Many of these “abandoned” assets were seized by the state and redistributed to pals of Russian President Vladimir Putin. This practice has largely continued but has expanded to include land, which wealthy Putin cronies are reportedly trying to force local landowners to sell via various intimidation tactics (arson, vandalism), or just outright seizing it. Insiders say the seizure of businesses in favor of the state has become one of the main trends in the Russian economy since the start of the full-scale invasion of Ukraine. According to calculations by Russian experts, over the three years of the war, the state has seized assets or filed lawsuits against assets totaling almost 4 trillion rubles. More than 320 billion worth is related to agriculture. Russian insiders say that grain has become the new oil, and the influence of the market is growing due to the fact that “old oil” is under sanctions. The government largely sanctions these seizures, which means farmers have little incentive to improve production as the more successful they are, the more likely they are to attract unwanted attention from Putin’s friends.
Nationalization of Ag Sector: Russia has been incrementally closing itself off from the rest of the world since its invasion and annexation of Crimea, formerly Ukraine territory. Western sanctions over the seizure of Crimea led Putin to issue “counter-sanctions,” which aimed to punish countries by banning imports from those that went along with the sanction regime. Russia was highly dependent on Western agriculture firms for key inputs, including seeds that were 90% imported. That meant Russian farmers no longer had access to the latest technologies and seed varieties. Western ag companies dominate because they’ve poured tons of time and money into research and development, whereas Russia has invested little, relying instead on adopting Western technology to suit Russian growing conditions. They are completely cut off from that now and experts say the deterioration in seed quality is now weighing on harvests. Crop chemicals, farm equipment, and other critical inputs have followed a similar path.
The situation is further complicated by factors like inefficient storage, a lack of farm workers, and a strong ruble, all contributing to a projected “collapse” of exports to their lowest levels in years. The RGU predicts a significant drop in overseas sales in 2025, reaching their lowest levels since Soviet times, with wheat exports potentially down by -28%. Grain sales provide a critical source of foreign currency for Moscow, and this downturn could expose further vulnerabilities in the country’s wartime economy. At the same time, Russia’s potential decline opens the door for increased US demand and possibly higher global prices. (Sources: World Grain, Moscow Times, All About Feed )
