Key facts
- Russia is rerouting grain exports from the Black Sea to the Baltic Sea due to disruptions and damage to port infrastructure.
- This shift in export routes adds an estimated $40-50 per ton in costs for exporters.
- August grain exports are projected to be less than half of last year's volumes.
- Subsidized rail routes are being expanded to facilitate grain transport to Baltic and Far East ports.
- The Baltic port of Vysotsk has higher wheat prices compared to Black Sea ports, reflecting increased logistics costs.
Russia is increasingly rerouting its grain exports to the Baltic Sea as disruptions and damage to port infrastructure in the Black Sea region make traditional routes unviable. This shift is significantly increasing costs for exporters, with estimates suggesting an additional $40-50 per ton. Consequently, Russia's grain exports in August are expected to fall by more than half compared to the previous year, potentially reaching as low as 1.5-1.9 million tons.
The challenges in the Black Sea basin, including the suspension of navigation in the Azov region and the halting of main grain terminals in Novorossiysk, have led to a sharp decline in export capacity. Even the Baltic route, specifically the port of Ust-Luga, is facing concerns following recent attacks, with fears that shipowners and insurers might restrict vessel calls.
To mitigate these issues, Russia is expanding subsidized rail routes to export ports in the Krasnodar region and northwestern Russia, with costs compensated from the federal budget. However, these alternative routes have a significantly lower capacity than the traditional southern corridor and can only compensate for a portion of the lost volumes.
The price difference between wheat at the Baltic port of Vysotsk ($250-260/t FOB) and Black Sea ports (around $212/t FOB) illustrates the added expenses. Furthermore, shipping costs on the Black Sea route to Egypt have risen, and freight rates across the Caspian Sea have also increased, making alternative routes more expensive overall.