According to estimates of the United Nations and the US Department of Agriculture, the volume of supply on the global grain market will increase by 1% in the 2023-2024 season and reach 3.59 billion tons. After a decrease in grain supply in the 2022-2023 season, the global market is expected to continue its long-term growth trend with an average growth rate of 1.43%.
The volume of supply on the grain market includes a new harvest in the amount of 2.8 billion tons and grain reserves at the beginning of the season in the amount of 782 million tons. At the same time, reserves amounted to 21.8% of the global grain supply, which is the lowest volume in the last 7 years. The decrease in inventories is due to a decrease in production volumes in the 2022-2023 season, as well as an increase in consumption.
Fig. 1. Dynamics of grain supply volumes on the world market, million tons
Source: UN, US Department of Agriculture, Rosstat
The structure of supply in the global market
Corn is the key crop in the structure of grain supply on the world market in the 2023-2024 season.: It accounts for 43% of global production and reserves, or 1.53 billion tons. Wheat ranks second with a share of 29%, which corresponds to 1.06 billion tons. Rice and barley occupy market shares of 19% and 5%, respectively.
Fig. 2. Structure of grain supply by crops on the world market in the 2023-2024 season., %
Source: UN, US Department of Agriculture, Rosstat
Regions-leaders in terms of grain production in the season 23/24
It is expected that in the 2023-2024 season, the three largest producers will account for 47.7% of global grain production. China will remain the leader with a share of 20.6% and a production volume of 578 million tons of grain. The second place in the ranking is occupied by the United States with a share of 16.4% and 459 million tons of grain produced. India is in third place with a share of 10.7% or 301 million tons.
Fig. 3. Regions-leaders in terms of grain production in the season 23/24
Source: UN, US Department of Agriculture, Rosstat
The top two largest producers represented by China and the United States have remained unchanged since the 2008-2009 season, when the United States lost first place to China.
The third place from the last season of 2022-2023 returned to India, which lost it in the 1999-2000 season, losing to the countries of the European Union. Brazil has held the fourth place in the ranking of grain producers for the third consecutive season, before alternating it with Russia.
Fig. 4. Changes in the leading regions in grain production
Source: UN, US Department of Agriculture, Rosstat
Export
Dynamics of global exports
According to UN and USDA estimates, the volume of global grain exports in the 2023-2024 season will grow by 2.4% and amount to 507.6 million tons. The market has almost restored the volume of exports after a drop in the 2022/2023 season, and in the long term, there is a tendency for grain exports to grow at an average annual rate of 3.74%.
Fig. 5. Dynamics of global grain exports, million tons
Source: UN, US Department of Agriculture, Rosstat
Grain export structure
In contrast to the structure of production, wheat prevails in grain exports – its share is 42% of the total volume of world exports, which is 216 million tons. The second place is occupied by corn with a share of 39% or 197 million tons of weight. The third and fourth places are occupied by rice and barley – 11% and 6%, respectively.
Fig. 6. Structure of grain exports by crops on the world market in the 2023-2024 season., %
Source: UN, US Department of Agriculture, Rosstat
Leading countries in terms of grain exports
The United States will remain the largest and permanent global grain exporter in the 2023-2024 season – the country has held the first place since 1960. This season, the United States has supplied 84 million tons of grain to the world market, which is 16.5% of global exports. The second place with a share of 12.9% is occupied by Russia, which exported 65 million tons of grain. Brazil and Argentina are in third and fourth place with shares of 10.7% and 10.2%, respectively.
It is important to note that the first four supplier countries account for half of the world's grain exports. In this regard, any changes in the grain market of these countries have a significant impact on the global market.
Fig. 7. The leading regions in grain exports in the 2023-2024 season, million tons
Source: UN, US Department of Agriculture, Rosstat
Fig. 8. Change of leading regions in grain exports
Source: UN, US Department of Agriculture, Rosstat
Place of Russia in the world
Russia is one of the key grain producers in the world. In the current season of 2023-2024, Russia will occupy:
- 2nd place in oat production (2.6 million tons – 17.2% of the market),
- 2nd place in rye production (0.8 million tons – 14.6% of the market),
- 2nd place in barley production (10.8 million tons – 14.4% of the market),
- 4th place in wheat production (136.6 million tons – 11.6% of the market),
- 9th place in corn production (53 million tons – 1.4% of the market),
- 40th place in rice production (0.7 million tons – 0.1% of the market).
Russia exports significant volumes of grain, which determines its strong position in the global market. If on average in the world in the 2023-2024 season only 18% of the grain produced was exported, then Russia supplied 49% of the grain produced. Such a significant export potential is due to a high harvest at the same time as relatively low grain consumption within the country.
Fig. 9. The share of export volumes in the volume of grain production in the 2023-2024 season
Source: UN, US Department of Agriculture, Rosstat
In the current 2023-2024 season, Russia as a grain exporter will take:
- 1st place in wheat exports (53.5 million tons – 24.8% of the market),
- 3rd place in rye exports (0.2 million tons – 29.2% of the market),
- 3rd place in barley exports (5.8 million tons – 20% of the market),
- 3rd place in oat exports (0.2 million tons – 9.5% of the market),
- 5th place in corn exports (5.6 million tons – 2.8% of the market),
- 21st place in rice exports (0.1 million tons – 0.2% of the market).
Prospects for Russian grain exports
Constraining factors
Reduction of the 2024 harvest
The year 2024 was marked for Russian grain producers by drought in the southern regions of the country and frosts in May in the central regions, which may lead to a decrease in harvest and, as a result, a potential decrease in exports.
Winter wheat, sugar beet, corn, rapeseed, and peas are most sensitive to such phenomena. At the same time, the greatest consequences of weather anomalies affected wheat, a key grain crop in Russian grain exports. According to Kommersant, crops on an area of 830 thousand hectares were lost.
In the current situation, industry analysts predict a decrease in wheat harvest by 5.5-7.85% to 85.7-86 million tons, and gross grain harvest to 135 million tons.
Reduced profitability of production
According to the analyzed 2023 company reporting data, both return on sales (net profit to revenue ratio) and gross profit margin (gross profit to revenue ratio) are declining in crop production and grain production in particular.
Fig. 10: Change in profitability of organizations engaged in crop production, growing cereal crops and rice
Source: company reports
In crop production, the average median return on sales in 2023 was 11.23%, below the three-year average of 16.78%. Gross margin was 16.93%, also below the 23.13% of the last three years.
There is a similar downward trend in profitability among companies engaged in the cultivation of cereals and rice. The return on sales decreased from 16.8% to 11.2%, and the gross margin decreased from 23.1% to 16.9%.
The decrease in profitability, according to Kommersant, is associated with an increase in costs: prices for mineral fertilizers, prices for spare parts for agricultural machinery and equipment, as well as an increase in workers' salaries.
Growth potential
Increase in product prices
Under the current circumstances and expectations of unplanned deficit in May 2024, there is an increase in prices for grain crops and, in particular, wheat. Such price growth is atypical for the May start of sales of new season grain, which entails lower prices. At the same time, the growth of producer prices is still supported only by exporters with short delivery terms under signed contracts.
Export potential to India
According to various sources, India is once again considering lifting the restrictive duty on wheat imports. In this case, Russian wheat could claim the Indian market. However, market participants note that the volume of purchases by India from all partners may be insignificant - up to 5 million tons, and the removal of import restrictions to protect Indian producers may be short-term.
Major production regions of Russia
According to the Unified State Register of Legal Entities, over 13,600 organizations operate in Russia in 80 regions of Russia, the main activity of which is the cultivation of grain crops, as well as rice. The largest number of companies are located in the Stavropol region, while the largest number of companies with revenue over 100 million rubles are located in the Rostov Region, Krasnodar region, Stavropol regopn, Volgograd region.
In addition to these companies, grain cultivation is also carried out by agricultural producers specializing in a different type of core business.
