Russia May Curb Grains Exports to Control Domestic Prices

Russia, the third-largest wheat exporter last season, may curb grain shipments should prices keep rising, Economy Minister Andrei Belousov said. Wheat jumped as much as 2.2 percent before paring gains after Interfax reported that Deputy Prime Minister Arkady Dvorkovich as saying there were no such plans.

The country in 2010 banned overseas sales for almost a year after drought decimated the grain crop. The price of the benchmark Chicago wheat contract more than doubled by February 2011 as Ukraine introduced export quotas. Russia’s government will make a decision in the fall, Belousov told reporters today at a conference in the southern city of Sochi.

“We are simply obliged to protect the domestic market, and we can have no illusions about that,” he said. “We won’t allow any surges in grain or food prices.”

Export restrictions are “not expedient” and would cause a surge in international grain prices, Interfax later cited Dvorkovich as saying. He said Sept. 11 in London Russia may sell cereals from state stockpiles to control prices. The government plans to discuss whether to start such sales at a meeting next week, Dvorkovich said today, as reported by the Prime news agency.

Stockpiled Grain

There is no reason to limit exports as suggested by Belousov because the government has other methods to regulate the market, Deputy Agriculture Minister Ilya Shestakov said today, as reported by Prime. Shestakov said Sept. 6 at a conference selling grain from stockpiles is one such tool.

Wheat for December delivery rose as high as $8.9925 a bushel on the Chicago Board of Trade after Belousov’s comments. The contract was up 1.9 percent at $8.96 by 6:07 p.m. London time. The grain advanced 37 percent this year, leading gains in the Standard & Poor’s GSCI gauge of 24 commodities, which added 3 percent.

Crop prices surged since June as U.S. farmers contended with their worst drought since 1956 and heat waves withered plants across southern Europe. Global wheat production will drop about 5 percent to 658.7 million metric tons this season, according to the U.S. Department of Agriculture. Russia’s harvest will fall 31 percent to 39 million tons, it estimates.

Export Duty?

Prices for fourth-grade milling wheat in Russia rose 19 percent in the European part of the country since July 1, according to data from Moscow-based researcher SovEcon. The government may consider a duty on exports in November or December, Arkady Zlochevsky, head of the country’s Grain Union, said Sept. 18. The group represents the nation’s biggest producers and traders.

Restrictions would discourage farmers from increasing output in the future, Pavel Skurikhin, president of Russia’s Grain Producers’ Union, said in an e-mailed statement today.

Belousov’s warning “could push many people to sell grain more quickly and not to delay sales,” Dmitry Rylko, general director of the Institute for Agricultural Market Studies, said by phone in Moscow today. The economy minister’s remarks were perceived as “irrelevant” for exports, said Andrei Sizov Jr., managing director at SovEcon.

The minister’s comments stemmed from concern about potential food-cost inflation after grain prices rose this season, said Alexander Korbut, vice president of the Grain Union. The government can restrain prices by selling from state cereal stocks without limiting exports, according to Korbut.

Shipment Forecast

“Rumors about Russian grain exports’ death have been greatly exaggerated,” he said.

Russian wheat exports slumped to 3.98 million tons in the 2010-11 season, when the ban was in place, from 18.56 million tons a year earlier, USDA data show. Global sales slid to 132.5 million tons, a three-year low. The agency anticipates 8 million tons of wheat shipments from Russia in the current 2012-13 season, ranking the nation fifth globally after the U.S., Australia, Canada and the 27-nation European Union.

Agriculture Minister Nikolai Fedorov said Sept. 19 Russia would harvest 72 million to 73 million tons of grain, compared with a June forecast of about 85 million tons. Exports may be 10 million to 14 million tons, he said, against a July estimate of as much as 20 million tons. Foreign sales reached a record 27.2 million tons in the 2011-12 season after a 94.2 million-ton harvest, government statistics show.

Farmers harvested 63 million tons of grain from 76 percent of the planted area in 2012-13 as of Sept. 19, Fedorov said. That was down from 77 million tons a year earlier, he said.

To contact the reporters on this story: Stepan Kravchenko in Moscow at skravchenko@bloomberg.net; Marina Sysoyeva in Moscow at msysoyeva@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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