Russia is on course to bring in the biggest harvest since independence and almost as much as the Soviet era all time high. With only a few weeks to go until the harvesting is over the grain collection is already up 12% y/y to 123.4mn tonnes and will finished the year at 127mn tonnes, Russian officials said on September 28.

That is well ahead of last year’s bumper 120.7mn tonnes, also a record setting year, and only just behind the Soviet all time high of 133mn tonnes set in the 70’s.

“The disastrous impact of communism on Russian agriculture is over,” said Charlie Robertson, chief economist at Renaissance Capital in a tweet.

Agriculture Minister Alexander Tkachev said that the total grain harvest for 2017 is expected to exceed 127mn tonnes, the highest level since 1978, implying an increase of more than 5% compared with the 2016-17 agricultural year, when the grain harvest amounted to 120.7mn tonnes.

All of the increase will be exported, which means will retain its title of “biggest grain exporter in the world” again this year. Grain exports are expected to grow 25% y/y – to 45mn tonnes in 2017 from 36mn tonnes in 2016 amid a 5% y/y decline in global wheat prices as of today. Russia is expected to earn some $20bn on grain exports this year, more than it will earn from arms exports and a third of what it earns from oil exports at the moment.

As a result of the higher grain harvest coupled with significant grain reserves at 51mn tonnes, domestic wholesale grain prices have dropped 10-15% since the beginning of the season.

"The harvest data indicate that the unfavourable weather seen in spring-summer only affected the fruit and vegetables segment, which came as a positive surprise," Gazprombank said in a research note.

"Assuming the absence of significant grain interventions by the government and/or a sharp increase in export volumes at the expense of internal sales (due to more favourable external prices vs. internal, the positive impact from grain prices on local CPI will remain in place, making our expectation of CPI acceleration to 3.7% in 2017 and 4.7% in 2018 overly pessimistic," it added.

The good harvest comes as a surprise as the Ministry of Agriculture began the year forecasting a take of only 100mn tonnes. Bad weather in May and a cold summer worried experts that this year would see a poor harvest. The Ministry later upgraded its forecast in August to 110mn, but still missed the mark.

The government has been pouring investment into the sector following the self-imposed ban on the import of European agricultural products in a tit-for-tat sanctions battle with the west. In 2016 agriculture was the only sector to show growth, although the growth this year has been lower.