March 1, 2011

 

Russia may prolong grain exports ban 

 

Russia said it may extend a ban on grain exports, long blamed for triggering global food price rises, beyond its provisional expiry date of July 1.

 

First Deputy Prime Minister Vitkor Zubkov refused to disclose further details while stressing that no formal decision had yet been reached.

 

Putin's initial decision to ban all exports following a record 2010 drought shocked the world's commodity markets and helped drive up world food prices that had already been soaring on booming Asian demand.

 

The wheat export ban went into effect in mid-August and has been cited as one of the many factors behind the social unrest and revolutions that have recently swept much of the Arab world.

 

The world's third-largest wheat exporter's clients include nations such as Egypt - the world's biggest importer that buys half of its wheat abroad.

 

The Russian exports ban had been initially due to expire at the end of 2010. But the government decided to continue restricting exports until mid-2011 so that it could determine whether the new harvest was good enough to allow the resumption of shipments abroad.

 

Last year's devastating drought and accompanying fires wiped out harvests in 28 Russian regions and prompted a series of price hikes that have seen the cost of some staples such as potatoes multiply tenfold since December.

 

Analysts link the spike in wheat prices to subsequent jumps in the cost of both Russian dairy products and beef. Putin's government decided to tackle that problem last week by eliminating the open trade of feed grain.

 

Zubkov said that Russia's remaining three-million-tonne supply of feed grain would be distributed across the country's regions on an "as-needs" basis only. He added that market prices would for now remain in effect for regular grain supplies.

 

Some industry insiders have suggested that the ban could possibly continue through next year. The head of Russia's Agriculture and Industry Union said he was certain that exports would not resume on July 1.

 

Several analysts, however, have pointed to a recent reduction in some wheat-product prices that suggests that the market may be starting to peak out. Some flour prices had slipped by 1.5% since the start of the month, sources said.