Russia Tightens Grip on Grain Industry as Wheat Prices Surge: Bloomberg

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Russia is strengthening its control over its vital grain sector, potentially giving it greater sway over exports just as global supply concerns escalate, according to a report by Bloomberg published on Sunday. This consolidation of the grain industry coincides with a spike in wheat prices, driven by poor weather conditions that are hindering Russia's wheat harvest.

Major Western trading companies, including Cargill Inc. and Viterra, withdrew from Russia last year under government pressure, paving the way for local firms to take over. Now, even Russia's top private trader, TD Rif, which recently changed its name to Rodnie Polya LLC, is facing pressure from the government, raising concerns about the shrinking number of independent players in the market.

"Russia's desires to control the commodity world are real, and their influence on grains is growing," says Dan Basse of AgResource to Bloomberg.

This consolidation has resulted in just four firms controlling three-quarters of grain exports from Russia's Black Sea terminals, up from 45% six years ago. This dramatic market consolidation, according to Dmitry Rylko, director of Moscow-based consultant IKAR, has placed control in the hands of a very limited number of players. Rylko shared this observation at the GrainCom conference in Geneva this month.

The government's increased influence over the grain sector could make it easier for Moscow to influence global supplies, especially as the war in Ukraine continues to disrupt Black Sea grain flows. Russia is already attempting to implement an unofficial minimum price for its crops, further highlighting its efforts to control the market.

"The trend toward more hardline policies and conservative ideology is inevitably accompanied by a strengthening of state intervention in the economy," says Andrei Kolesnikov, a senior fellow at the Carnegie Endowment for International Peace in Moscow, to Bloomberg. "The state is becoming politically untouchable and the main player in the economy."

The consolidation of the Russian grain market, combined with weather-related disruptions to its wheat harvest, has contributed to a surge in global wheat prices. The International Grains Council expects Russia's wheat output to fall by about 6% this year, raising concerns about food inflation.
While benchmark wheat prices have rallied in recent months, they remain about 50% below a record high set in 2022, when the war first disrupted Black Sea grain flows. However, better prospects for US crops could help to limit supply fears.

One major concern now is how Russia's efforts to control its grain exports will affect theglobal market Their attempt to set a minimum price for crops, along with tighter government control of the grain sector, could give them more power to influence global grain supplies.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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