From Stabilization to Stagnation: The Consequences of State Regulation of Russia’s Grain Market

Floating export duties introduced to stabilize prices have fulfilled their short-term objective, but are now becoming a constraint on the sector’s development. This conclusion was reached by the authors of a study published in the journal Economic Policy. Experts point to the need for a gradual abandonment of this mechanism in order to avoid a reduction in production.

An analysis of the grain damper mechanism over the period from 2021 to 2024 revealed significant financial losses for market participants. According to the study, the cumulative loss of income for agricultural producers in Russia reached 200 billion rubles. Exporters suffered an even greater blow, with their margins shrinking by 370 billion rubles.

This dynamic indicates that the withdrawal of part of revenues through export duties significantly reduces the investment attractiveness of the agricultural sector and the profitability of business operations.

The researchers acknowledge that the introduction of export duties also produced certain positive effects, but these were largely localized in nature.

• Price containment: Domestic wheat prices in Russia were 10–25% lower than they could have been under a zero-duty scenario.

• Growth in processing: Domestic demand for wheat increased by 10.4 million tons, indicating the development of internal processing industries and livestock production.

• Fiscal effect: The state received additional revenues, part of which was returned to the agricultural sector in the form of subsidies.

However, as noted in the analytical paper, these advantages are outweighed by long-term negative trends. Artificial regulation distorted market signals. As a result, gross wheat harvests declined by 8.1 million tons compared with potential levels, while export flows decreased by 12.2 million tons. Commercial stocks also fell within a range of 9% to 19%.

The key conclusion drawn by the analysts is that the effectiveness of export duties is limited to the short term. If the current policy is maintained over the long run, the sector risks facing a disincentive to production. For farmers, expanding output becomes economically unprofitable, which may ultimately lead to the opposite effect — a shortage of supply and rising prices.

As the most rational scenario for regulators, experts propose a gradual отказ from the grain damper mechanism. One transitional measure could be a systematic increase in the base cutoff price used to calculate duties, alongside a broader revision of the overall approaches to regulating the grain market.