Russian medium grain rice: a difficult year for exports

The exclusion of Russian banks from SWIFT, an international payment system used by financial institutions around the world, since Russia's invasion of Ukraine on Feb. 22, 2022 has created difficulties for Russian rice exporters.

While Russia is a relatively small exporter of Japonica rice compared to other origins, it is a key supplier for nearby countries such as Azerbaijan and Georgia, and has also previously supplied key Japonica buyers Turkey, Egypt and Jordan.

With it essentially forced out of the market, buyers of Russian medium grain have been forced to look elsewhere for their supplies.

Russian rice: key statistics

Rice is predominantly grown in the southwest parts of Russia, near the borders with Azerbaijan, Georgia and Kazakhstan, although there is some small volume production in eastern Russian along the border with China and North Korea. Around 73% of Russian rice output is grown in the Krasnodar region.

The main rice variety grown in Russian is Rapan, a round grain that can be used to make sushi and which is similar in quality to Egyptian round grain rice. Other varieties grown in Russia include Osman rice, a medium grain similar to Turkey's Osmancik and Calrose.

According to the latest update on Russia from the US Department of Agriculture, published in May 2021, Russian paddy output in 2022 was due to reach 846,000 mt. This would have been a 21% year on year decrease and 20% below 2020's level. The USDA said that the decline was due to insufficient water availability.

Rosstat estimated 2022 paddy output 14% lower year on year at 923,000 mt on March 13, marking the first time that Russian paddy output has dipped below 1 million mt in recent years. Rice production was impacted after a critical dam on the Kuban River in Krasnodar burst in June 2021, impacting water supply for rice growing.

As a result of reduced 2022 output, milled equivalent exports were due to decline by 67% on year to 50,000 mt in 2022, more than half the volume exported in January-October alone in 2021 (109,000 mt), according to Rosstat. In January-April 2021, Russia exported 26,200 mt to Turkey, 3,600 mt to Belgium and 975 mt to Jordan.

Russian exports since 2022

As a result of the decline in production, and also as retaliation for the economic sanctions placed upon it, the Russian government banned exports from July 1-Dec. 31, 2022. This decree was extended for another six months in November, with the ban due to end June 30, 2023. However, this did not include exports to Eurasian Economic Union countries: Armenia, Belarus, Kazakhstan and Kyrgyzstan.

While it is currently unclear whether this ban will be further extended, it seems unlikely that Russia would be able to export much rice due to the current economic sanctions. One source said that Russian was "moving into Iranian territory" in terms of payment difficulties, and that as a result they had seen increased demand for Indian medium grain rice from Turkey, Georgia and Azerbaijan. These countries have typically been considering importing more rice than normal, as risks associated with shipping corn out of Ukraine have made rice a more attractive prospect.

A source said that this trade flow with Azerbaijan and Georgia was "not huge but interesting." Trade so far has typically been concluded in 1,000-2,000 mt lots for container shipment, with rice for Azerbaijan transiting through Bandar Abbas Port.

Kazakhstan has also absorbed some of this demand. According to reports, Kazakh rice exports in H1 2022 were 31% higher on year in value terms, with exports to Russia more than double the normal volume. This led to local rice prices rising by 16% during that six-month period.

Egypt and Turkey are also historical buyers of Russian rice. However, sources in both countries downplayed the significance of Russia's absence from the market. A source in Turkey said that while the country typically buys paddy from Russia, "the amount is not so much." A source in Egypt said that while payments from Russia had been delayed, it has not had a problem importing wheat from the country. Additionally, the source said that most of Egypt's recent rice requirements had been sourced from India.

Relative impact

The Russian Agriculture Ministry said in November 2022 that 2023 output would likely recover and surpass 1 million mt. Although this should ensure that Russian exports return to normal levels, payment issues may limit the volume of Russian medium grain that hits the market.

While Russia's absence from the Japonica export market has not caused too much concern amongst Japonica buyers, it has created new opportunities for medium grain exporters. It has come at a time when the influence of traditional Japonica sellers -- California and Italy -- has been more limited. Taken as a whole, this situation has forced buyers to consider other origins, particularly India, Vietnam and Myanmar. Although not revolutionary on its own, as one of several altered trade flows in 2022, it may have contributed to a longer-term diversification of buying interest.