Amidst increasing global wheat prices and worries about supply disruptions, Russia is ramping up its oversight of the grain industry, aiming to assert dominance in the export market.

After experiencing the departure of major Western players such as Cargill Inc. and Viterra due to government pressures, Russia's leading private grain trader, Rodnie Polya LLC, is now encountering challenges from the state.

The market has become more concentrated, with only four firms now accounting for 75 percent of grain exports from Russia's Black Sea terminals, a significant increase from 45 percent six years ago.

Consolidation has accelerated following President Vladimir Putin's invasion of Ukraine, enabling Moscow to wield greater influence over global wheat supplies. This control assumes importance as adverse weather conditions threaten Russia’s wheat crop, exacerbating market concerns.

"Russia’s ambitions to dominate the commodity market are tangible, and their sway over grains is expanding," remarked Dan Basse, president of AgResource, a Chicago-based consulting firm.

The private sector is also feeling the impact. Rodnie Polya, previously known as TD Rif, has faced regulatory hurdles, with owner Petr Khodykin accusing the government of coercing him into selling the company.

Export volumes for Rodnie Polya plummeted by 40 percent in April compared to the previous year, underscoring the profound repercussions of state intervention.

Russia's strategy extends beyond grains. Since the onset of the Ukraine conflict, Moscow has progressively focused on seizing assets owned by local oligarchs and foreign companies, either nationalising them or selling them to Kremlin-favoured entities. This trend encompasses diverse sectors such as pasta production and dairy, indicating a wider pattern of state intervention in the economy.

While Western traders continue to engage in purchasing Russian grain, they encounter notable obstacles in obtaining dependable data concerning crop volumes, stockpiles, and export conditions.

For instance, the US Department of Agriculture now relies more on satellite images for its crop forecasts due to the absence of on-the-ground staff in Russia, introducing an additional layer of uncertainty into global agricultural outlooks.

Recent surges in global wheat prices stem from concerns over reduced Russian output due to adverse weather conditions. Analysts have significantly lowered production estimates, with the International Grains Council predicting a 6 percent decline in Russia’s wheat harvest this year.

Despite the recent rally, wheat prices remain approximately 50 percent below the peak reached in 2022 when the war initially disrupted Black Sea trade routes.

Russia is already attempting to impose an unofficial minimum price for its grain exports, a move that could further consolidate its influence in the market.

Despite these manoeuvres, there are no indications that Russia will disrupt its grain supplies in the same manner it did with natural gas supplies to Europe following the Ukraine invasion.

A significant portion of Russia's grain exports continues to be directed towards politically allied countries.

The rapid consolidation of Russia’s grain market among a handful of key players underscores the shifting dynamics of global agricultural trade and prompts concerns about future supply stability.

As Dmitry Rylko, director of the Moscow-based consultancy IKAR, observed, "We have witnessed a significant market consolidation in the hands of a very limited number of players".

Image source: Bloomberg