After China allowed imports of Russian peas in 2022, many farmers had switched to peas from other crops, including wheat, whose profitability has fallen because of global oversupply that dented prices.

Now the issue is a surplus of peas, which for this year will be around 700,000 metric tons, according to an estimate by Reksoft consultancy.

WHY IT MATTERS: Russian farmers found it difficult to replace Canadian peas in the Chinese market despite making inroads.

“Everyone went for peas, expecting high profitability. They got low prices, low profitability. As a result, there’s an oversupply and no motivation for next year,” Reksoft’s head Dmitry Krasnov said.

Reksoft estimated the pea harvest for the season that runs from June last year to July 2025 at 5.3 million metric tons, up 40 per cent from the previous year. Overall exports are expected to fall to 2 million tons, down 15 per cent as compared with the previous year.

Russia exported 1.13 million tons of peas to China in the 2023/24 season, increasing its market share to 49.1 per cent at the expense of Canada and becoming the world’s leading pea exporter.

“Hopes that China’s market will soak up any supply did not materialize,” said Sergei Pluzhnikov, head of Russian Pulses Analytics. He predicted that farmers will turn to oilseeds in pursuit of better margins.

China uses peas to produce pea protein, which, like other plant-based proteins, is used as an ingredient in many dietary food products that are growing in popularity. The country exports most of its pea protein to markets worldwide.

China applied a 100 per cent tariff to Canadian pea imports among retaliatory measures against Canada’s levies on China-made electric vehicles and steel and aluminum products.

But Krasnov said it was difficult to replace Canadian peas, which meet the requirements of Chinese producers.

“Canada remains in the market, supplying peas. The issue is quality and stable long-term contracts between Canadian suppliers and China’s processing sector,” Krasnov said.

— Reporting by Gleb Bryanski

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“Stavropol’s grain harvest exceeded 8.5 million tons. So, this year we’ll definitely have enough bread,” Stavropol Governor Vladimir Vladimirov wrote on his Telegram channel. He said 85 per cent of the grain-sown area had been harvested.

Three Russian grain traders, who spoke on condition of anonymity, told Reuters that the first new-crop grain from Stavropol is actively entering the market.

Slow start for new crop exports

Russia’s export volumes fell to their lowest level since 2008 at the start of July due to a late start of the harvesting campaign, and some European traders told Reuters that slow sales of new crop wheat were disrupting the ship loadings at Russia’s Black Sea ports.

Stavropol, the region next to the Caucasus Mountains, is on track to become Russia’s top grain- and wheat-producing region this year after drought hit Rostov, the steppe region along the Don River.

Rostov Governor Yuri Slyusar told the TASS news agency that the grain harvest forecast in the region had been cut by 30 per cent to 8 million tons because of the drought, with about one-fifth of the seeded area there damaged.

In Krasnodar, another top-three grain-producing region, which borders Rostov in the north and Stavropol in the east, a better crop in the south is expected to compensate for losses from drought in the north.

“We expect that the regions where weather conditions were more favourable will help partially compensate for the losses through a high yield,” Governor Veniamin Kondratyev wrote on Telegram.

He estimated the collected grain crop at 8.5 million tons and said the harvesting campaign will be over this week.

Expected to remain top wheat exporter

The governors provided no data on what share of the collected grain was wheat, but in previous years the biggest share of the three regions’ seeded area was under wheat. Russia is expected to remain the world’s largest wheat exporter.

Dmitry Rylko, head of the IKAR consultancy, said the new-crop grain is coming mostly from southern regions, not central Russia, where the weather has been better and which is expected to compensate for crop losses in the south.

“Every day we see that the inflow of grain to the terminals is increasing,” Rylko said. He noted that, for the moment, there is a shortfall of new grain to cover fresh contracts but expects the gap to disappear within one or two weeks.

The Agriculture Ministry forecasts this year’s grain harvest at 135 million tons, including 90 million tons of wheat. This figure includes grain from Russian-controlled territories of Ukraine, which analysts do not include in their estimates.

As drought ravages Russia’s key agricultural regions, including Rostov, which supplied 12 per cent of Russian wheat in 2024, the official estimate is in doubt. President Vladimir Putin has said publicly that there are questions over this year’s harvest.

—Additional reporting by Mikhael Hogan in Hamburg

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Patrushev, who is responsible for agriculture in the government, said Russia will export 44.5 million metric tons of wheat and 53 million tons of grain in the 2024-2025 season.

Russia did not disclose statistics for last season’s wheat exports but the government’s estimates stand at 53 million tons, while the U.S. Department of Agriculture reported the figure of 55.5 million tons, implying a fall of up to 20 per cent this year.

“The situation with grain exports is currently developing negatively. Compared to the same period in 2024, the dynamics are significantly lower,” Patrushev told a conference in Sochi in southern Russia.

Extreme weather, falling profits

Russian farmers were hit by extreme weather last year. They are also complaining about falling profitability of growing wheat due to high export duties, rising costs for fuel and fertilizers, a strong rouble, and high interest rates.

Despite the fall in wheat exports, Russia maintains the status of the world’s largest wheat exporter, but its share of the global market is set to shrink to 22 per cent from 28 per cent last season.

President Vladimir Putin ordered the government to boost agriculture exports by 50 per cent by 2030 with grain exports hitting 80 million tons a year.

“Judging by the latest trend, the movement is going in the opposite direction, and this needs to be urgently corrected. We need to intensify supplies, we must work together to maintain Russia’s positions in the global market,” said Patrushev.

He flagged a change in the way the export duty is calculated as a possible measure to boost exports but said the duty, introduced to protect the domestic market, will remain in place.

Exporters urged to find new markets

“We proceed from the fact that export is an important sphere, but our priority is our domestic market. Based on this, we will make decisions,” Patrushev said.

Patrushev urged exporters to find new markets and said the loading capacity at Russian ports should be increased and supporting infrastructure improved.

Russian exported grain at a record pace in the first part of the season but exports slowed sharply in February when export caps, also aimed at protecting the domestic market from food price inflation, took effect.

Patrushev said that he expected this year’s harvest to be better than last year as the sowing campaign in many regions proceeded ahead of schedule.

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Russia, the world’s largest wheat exporter, was a staunch supporter of Bashar al-Assad and supplied wheat to Syria through complex financial and logistical arrangements, circumventing Western sanctions imposed on both Syria and Russia.

A Russian source close to the government told Reuters supplies to Syria have been suspended because exporters are concerned by uncertainty over who will manage wheat imports on the Syrian side following the change of power in Damascus.

“I think no one would dare supply wheat to Syria under the current circumstances,” the source, who spoke on condition of anonymity due to the sensitivity of the situation, told Reuters.

Shipping data shows one vessel, the Mikhail Nenashev, is anchored off the Syrian coast, while another, the Alpha Hermes, is heading towards the Egyptian port of Alexandria after remaining off the Syrian coast for several days.

The Syrian General Establishment for Cereals Processing and Trade (Hoboob) used to conduct wheat purchasing tenders but has increasingly relied on a network of international intermediaries to maintain Russian supplies despite sanctions.

Rebel leader Ahmad al-Sharaa’s Islamist group, which ousted al-Assad in a swift campaign in Damascus last week, is asserting its authority over Syria’s state by deploying police and installing interim officials.

However, they have yet to establish a new administration in Hoboob or create another commodity importing agency, according to Syrian sources, who also spoke on condition of anonymity.

Russian and interim government in contact

A Syrian source told Reuters that vessels were delayed because of uncertainty over payments and that Russia and the interim government were in communication regarding the issue. A Russian industry source said Russian exporters were in contact with the Syrian side.

Russian Deputy Foreign Minister Mikhail Bogdanov said on Friday that Russia has made direct contact with the political committee of Syria’s Islamist rebel group, Hayat Tahrir al-Sham, aiming to maintain its military bases in Syria. He did not comment on the wheat trade.

Given there was no payment from the Syrian side for the delivered wheat, a Russian industry source said the cargo of about 60,000 metric tons loaded on the two vessels might be sold to another buyer.

The two vessels can carry a combined 33,000 tons of wheat. However, part of the Russian grain trade with Syria is conducted using sanctioned Syrian vessels that are not visible on tracking systems.

Eduard Zernin, head of the Russian Grain Producers and Exporters Union, told Reuters this week that Russian grain exporters did not plan to unilaterally stop supplying wheat to Syria.

Zernin estimated Syria’s imports at about 2 million metric tons of wheat per year, and said Syria was not a major consumer. A disruption in Russian wheat supplies, however, could cause hunger in the country of over 23 million people.

Dmitry Rylko from IKAR consultancy estimated wheat exports to Syria at 300,000 tons so far this season, with the country ranking 24th among Russian wheat buyers. Syrian imports vary from year to year depending on its own harvest.

Syria could produce up to 4 million tonnes of wheat in a good year, which would be enough for domestic needs and allows for some exports.

However, war and successive droughts have eroded its crop, forcing the country to rely on imports from the Black Sea region to sustain a bread subsidy program essential for its population.

— Additional reporting by Maha El Dahan in Dubai and Gleb Bryanski in Moscow

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Russia has been pushing to establish the exchange as part of a broader plan to create new financial instruments, detach its trade from the U.S. dollar and help Moscow combat Western sanctions.

President Vladimir Putin said at the summit that BRICS countries, which are among the world’s largest producers of grains, legumes, and oilseeds, could establish such an exchange, potentially expanding it to trade other major commodities.

The plan to create the exchange has been approved by leaders of the BRICS countries, whose members include Brazil, Russia, India, China and South Africa.

The BRICS countries welcomed Russia’s grain exchange plan in their communique at the summit and backed proposals to subsequently develop and expand it to other agricultural sectors.

Eduard Zernin, head of the Grain Exporters Union, whose members export 80 per cent of Russian grain, said that based on the experience of creating the BRICS’ New Development Bank, launching the joint exchange would require years of preparatory work.

Zernin stated that the proposed new exchange should have international status to protect it from potential Western sanctions.

“The main stage of the process has been completed, the initiative to create an exchange has been approved at the level of BRICS country leaders,” Zernin said.

Russia, the world’s biggest wheat exporter, has been striving for years to develop its own commodity pricing mechanisms to counter the dominance of Western exchanges, especially following this year’s decline in global grain prices Wv1.

The Russian government, concerned about high export volumes at low prices in the past few months, has informally agreed with leading exporters not to sell Russian grain to sovereign buyers through intermediaries, according to the Grain Exporters Union.

The government has also recommended that exporters not sell wheat at a price below $250 (C$346) per metric ton, which is well above current levels, Reuters sources have said.

Iran and Egypt, which are now BRICS members, are major buyers of Russian wheat.

New exchange needed?

Some industry analysts questioned the immediate need for a new grain trading platform given the smooth functioning of existing international grain exchanges.

“Due to the advantages that established exchanges have in terms of customers, infrastructure, track record, and liquidity, it will take some time for the new exchange to catch up,” said Yaroslav Lissovolik, head of the BRICS+ Analytics think tank.

Alexander Belozertsev, head of Alexandra Inc consultancy, said that, unlike Russia, other BRICS members, such as India, China, Brazil, and South Africa, already have well-established commodity trading platforms of their own.

“Strategically and technologically, all these exchanges have significantly advanced in trading agricultural derivatives compared to their Russian competitors. Do they really need the implementation of Russia’s initiative under the BRICS umbrella?” he said.

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Frosts have damaged crops in many regions this year while there has also been a drought in some areas, leading analysts to downgrade forecasts for this year’s harvest.

Agriculture minister Oksana Lut said on Monday that Russia may declare a nationwide emergency possibly, as soon as the end of this week. Emergency regimes have already been introduced in 11 regions.

Igor Pavensky, Rusagrotrans’ marketing director, estimated that the drought and May frosts affected regions that account for up to 40 per cent of Russia’s winter wheat area.

“It (exports) will probably not be as widespread as in the current season,” Sergeуchuk said, speaking during the St. Petersburg international economic forum.

VTB is one of Russia’s largest lenders to the agricultural sector.

Sergeуchuk said Russia was present in grain markets such as Mexico, Indonesia and Vietnam in the current season where other exporters usually play a big role while adding it would try to ensure it continued to play a leading role in supplying the Global South.

Russian grain exports this season, which will end in less than a month, have already totalled 65 million metric tons to date, with a record 70 million tons expected at the end of the season, Sergeуchuk said.

The Ministry of Agriculture has forecast that in the 2024/25 season grain exports from Russia will amount to about 60 million tons.

Russia is the world’s largest exporter of wheat.

According to analytical agency ProZerno data, from July to November 2023 the largest importers of Russian grain were Turkey (over 3.5 million tonnes) and Egypt (2.7 million tonnes).

Russia supplied about 700,000 tonnes of grain to Indonesia, nearly 382,000 tonnes to Mexico, and just over 131,000 tonnes to Vietnam. All of them bought wheat, Vietnam also bought corn.

VTB officially exited the grain business a year ago, announcing the sale of a stake in Demetrа, one of the largest grain holdings.

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Last week’s attacks mostly struck the sea ports of Odesa but Monday’s pre-dawn strikes hit infrastructure along the Danube, an export route whose importance has grown since the demise of the deal allowing Ukrainian grain transit via the Black Sea.

“The Russian terrorists have again attacked the Odesa region overnight. Port infrastructure on the Danube river is the target this time,” regional governor Oleh Kiper wrote on the Telegram messaging app.

Global wheat and corn futures rose sharply on fears that Russian attacks and more fighting, including an overnight drone strike on Moscow, could threaten grain exports and shipping.

News website Reni-Odesa cited a local official as saying three grain warehouses had been destroyed in the Danube port city of Reni during a drone attack.

Video footage obtained and verified by Reuters showed a man cursing in disbelief at several damaged grain warehouses at Reni, an important transport hub across the Danube to NATO and European Union member Romania.

“This recent escalation poses serious risks to the security in the Black Sea,” Romanian President Klaus Iohannis said on Twitter, drawing attention to the proximity of the attack to Romania’s border.

Since Russia’s full-scale invasion in February 2022, Ukraine has expanded grain exports overland via the EU to about 1 million tons a month, with large volumes being exported from Romanian ports and along the Danube.

“Russia has in the past months not attacked Ukraine’s overland and inland waterways grain infrastructure,” one European trader said. “Any interruption of this traffic could quickly hit international grain supplies.

A French trader called it a “major development and a major blow” to Ukrainian exports, adding: “Without the Black Sea corridor and now with attacks on alternative routes, it will be hard to take Ukrainian grains out of the country.”

Kiper said: “Russia is trying to fully block the export of our grain and make the world starve.”

‘Food terrorism’

Ukrainian officials gave few details but police said warehouses storing grain crops had been hit along with tanks for storing other types of cargo, causing a fire.

Seven people were wounded and one of them was in a critical condition, Kiper said.

Police published photographs showing the damaged facilities, and containers marked with the logo of Maersk Group could be seen in one of the images.

Some Ukrainian news outlets reported explosions overnight in the area of Izmail, another important Ukrainian Danube port, but no firm reports of damage followed.

“It (Russia) tries to extract concessions by holding 400 million people hostage,” Ukrainian Foreign Minister Dmytro Kuleba wrote on Twitter. “I urge all nations, particularly those in Africa and Asia who are most affected by rising food prices, to mount a united global response to food terrorism.”

Russian wheat prices jump

Last week, Russian wheat export prices jumped along with global prices after Russia’s withdrawal from the Black Sea grain deal and amid restrictions on navigation in the Kerch Strait, analysts said.

According to the IKAR agriculture consultancy, the price of 12.5% protein Russian wheat scheduled for free-on-board (FOB) delivery in the second half of August jumped to $242 a ton at the end of last week from $228 a ton the week before.

Russia-focused agricultural consultancy Sovecon estimates total Russian wheat exports in July at 4.3 million tons, compared to 2.5 million tons in July 2022 and 2.8 million tons on average historically for the month of July. Russian wheat exports have been at record highs in recent months due to large stocks and high yields.

Russia exported 1.2 million tons of grain last week compared to 960,000 tons a week earlier, including 1.1 million tons of wheat compared to 820,000 tons a week earlier, Sovecon wrote in its weekly note, citing port data.

–Reporting for Reuters by Olena Harmash, Tom Balmforth, Olga Popova and others.

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Most international grain traders have stopped new investment in Russia since last year following Moscow’s invasion of Ukraine but continued exporting Russian wheat.

“As grain export-related challenges continue to mount, Cargill will stop elevating Russian grain for export in July 2023 after the completion of the 2022-2023 season,” the company said in an emailed statement.

Elevating refers to the lifting of grain into export vessels.

Cargill, which owns a stake in a grain terminal in the Black Sea port of Novorossiisk, did not specify if it was selling the stake.

The Russian agriculture ministry had said earlier that Cargill had informed it that it would stop its grain export activities from the start of the next season.

“The cessation of its export activities on the Russian market will not affect the volume of domestic grain shipments abroad. The company’s grain export assets will continue to operate regardless of who manages them,” the agriculture ministry told Reuters.

In addition, grain trader Vittera, part-owned by Switzerland-based mining and trading giant Glencore, is planning to stop grain trading in Russia, Bloomberg News reported, citing sources familiar with the matter.

A spokesperson for Vittera declined to comment but said a statement would be issued at a later stage.

Vittera and Cargill are among the largest exporters of Russian wheat.

According to RBC business daily, Cargill will export 2.2 million tonnes of Russian grain in the 2022-23 exporting season, or around four per cent of Russia’s total grain exports.

— Reporting for Reuters by Olga Popova in Moscow, Karl Plume in Chicago and Sybille de La Hamaide in Paris; additional reporting by Olzhas Auyezov; writing by Sybille de La Hamaide.

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Share sales by Russian companies have been rare since Western sanctions imposed in 2014 over Ukraine cut access to foreign capital markets and after a sharp drop in global oil prices, the lifeblood of the country’s economy, cooled interest in Russia’s assets.

Rusagro, which produces sugar, pork and fats and has ambitious expansion plans, is the first Russian company to try to sell new shares in about six months, since retailer Lenta raised US$150 million in October 2015.

In February, a unit of China Investment Corporation sold its stake in Moscow Exchange on the market and lender Promsvyazbank started this month book building for a share placement by an existing shareholder.

“We are counting on foreign investors,” a source close to Rusagro’s offering said.

Rusagro said that Vadim Moshkovich, its controlling beneficial shareholder, planned to purchase up to around US$100 million of newly issued global depositary receipts.

State-backed Russian Direct Investment Fund was also rumoured to buy into the issue, a financial market source said without providing details.

Shares in Rusagro have risen by 220 per cent over the past two years as the company ramped up output and revenues, helped by import restrictions and higher sugar prices.

Rusagro intends to use the net proceeds from the offering for funding of investment projects, including a pig breeding complex in Russia’s Far East and greenhouse facilities in central Russia, it said in a statement.

It also plans to modernize the recently acquired Razgulay sugar plants and may make more acquisitions, it said.

J.P. Morgan, UBS and VTB Capital are acting as joint global coordinators and bookrunners in connection with the offering.

A financial market source said the bookbuilding will be completed on April 27 with pricing on April 28.

— Reporting for Reuters by Olga Popova in Moscow. Additional reporting and writing for Reuters by Maria Kiselyova.

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Russia’s government banned wholesale imports of fresh food products from the European Union, Canada, the U.S. and certain other countries in 2014, in retaliation for Western states imposing sanctions on Russia over its annexation of Crimea and support for separatists in eastern Ukraine.

Suren Matevosyan, a Russian-educated lawyer, set up a company that takes orders for cheese online from Russian customers, then sends their purchases to them in the post.

It is legal because the online shop is in Germany, outside Russian jurisdiction, and individuals have a personal allowance of up to five kg of foodstuffs that they can bring in without being subject to import restrictions.

“Just yesterday we were talking to South Tyrol cheese makers,” said Matevosyan. “When they first hear ‘Russia,’ they say ‘What? Russia? But there’s a ban!’ Then I explain the scheme and I can hear how their eyes begin to shine and they say ‘Yes, yes, yes, I’ll send you my proposal now.'”

Russian President Vladimir Putin has presented the embargo on European foodstuffs as a matter of national pride and a demonstration that domestic producers can meet the needs of Russian consumers without the need for foreign imports.

But in reality, the impact of the embargo has been softened because there are ways of sidestepping it — at least for those consumers with deep pockets.

A high-end Moscow restaurant in the ground floor of a building that also houses a government agency has on its menu an item called “Forbidden cheeses.” Asked what they were, a waiter said they were on the banned list.

A supermarket on the same street stocks Parma ham from Italy, and foie gras pate from France, complete with prominent labels giving their country of origin. The prices are out of the reach of the average Russian.

The embargo is so leaky that a senior Russian official, whose job includes helping to enforce it, made a joke at an off-the-record briefing with journalists about the fact that banned products were available in expensive Moscow restaurants.

To get round the ban, products may be repackaged in neighbouring countries to disguise their origin, trucks in transit through Russia may secretly unload some cargo, and imported food can be documented as something else.

Tatiana, 36, a manager at an international company in Moscow, says Russian cheese tastes of “modelling clay” and she prefers cheese from abroad.

“I buy it because it tastes of cheese, not fat. Most of the Russian cheese I’ve tried does not taste like cheese,” she said.

Yevgeny Kuklin, 40, a lover of French cheese, also dismissed the local product: “Sanctions have complicated life. There is not much cheese and it’s mostly no good,” he said.

‘Filling a cheese hole’

Matevosyan lives in the German city of Hamburg and his main line of work is importing professional musical equipment into Russia.

But he spotted a new business opportunity when, in December last year, the Russian government clarified that Russians could order a limited amount of cheese and other banned products in foreign internet shops for personal use.

“We were making jokes but at some point everyone got serious. Twenty minutes after, we had a plan and a week after we started to sell,” Matevosyan, 28, told Reuters.

“I think we are lucky to have picked the right niche where there was a vacuum… We are just filling a cheese hole,” he said.

The niche has proved wider than he initially thought. Before the ban, imports accounted for half of all the cheese sold in Russia and the bulk of those imports came from countries now on the sanctions list.

Matevosyan said his shop, which sells cheese produced by small farms in Germany, France, Italy, Britain and the Netherlands, was initially aimed at middle-class consumers and he expected the average bill to be around 40 euros (about C$60).

But people spend on average 80 to 100 euros per visit to the site, Chillcheese.ru, and Matevosyan said his customers include government officials, bankers, and top managers.

The shop currently handles on average five orders per day, earning 10 to 15 euros profit from each kilogram.

“We are not making huge volumes, we are not taking clients from import substitutes… We serve the segment which would not have gone for a Russian camembert anyway.”

To stay within the law, the shop rejects orders from restaurants and has hired a detective agency to make sure enterprises are not buying secretly on the website.

However, Matevosyan said his business does not hinge on sanctions staying in place.

“The lifting of sanctions would open the door for expansion… It will be a signal for us that we should make a foray into this market, open stores… At some point we will start getting ready for it,” he added.

— Reporting for Reuters by Maria Kiselyova and Olga Popova.

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