Russian wheat restrictions pose new trial for Turkish inflation

This article was written by Kagan Koc and Anatoly Medetsky for Bloomberg News. It appeared first on the Bloomberg Terminal.

Restrictions on agricultural imports risk stoking inflation that’s already running twice as hot as the government targets, according to the head of Turkey’s industry body for cereals and pulses.

The restrictions imposed two days ago apply to Russian agricultural products that include wheat, corn, crude sunflower-seed oil and rice, according to Zekeriya Mete, head of Turkey’s Cereals, Pulses, Oilseeds and Products Exporters Association. The group, which represents 500 members producing everything from spaghetti to chocolate biscuits, has contacted the Economy Ministry in an attempt to convey concerns, he said.

When contacted by Bloomberg, Turkey’s Economy Ministry declined to comment. The Agricultural and Customs Ministries had no immediate comment.

With Russia the biggest source of Turkey’s wheat imports, “eventually this may reflect on food-price inflation,” Mete said in a phone interview, referring to the difficulty of brokering contracts in new markets. “Our profits depend on low shipping costs, and if we are forced to buy wheat from markets further away, our costs will inevitably increase.”

Turkey’s food producers’ price index is running at its highest since 2015, suggesting upward pressure on prices that have already helped inflation soar to 10.1 percent — more than twice the official target of 5 percent.

Russian Exporters

Russian exporters have also asked their government to help restore shipments to Turkey, saying changes to licensing rules put restrictions on trade from early this week.

The measures will “extremely negatively affect the volumes of all Russian farm exports, primarily wheat,” the National Association of Exporters of Agriculture Products lobby said in a letter to Russia’s Agriculture Ministry, a copy of which was obtained by Bloomberg.

Dmitry Rylko, director general at the Moscow-based Institute for Agricultural Market Studies said Russia may have to find new markets for 600,000 tons of wheat was expected to go to Turkey for the remainder of the season ending in June. “This won’t be easy,” he said. “But something can be done.’’

The ban could hurt Russian wheat prices, which rose to a 10-month high last week. Russia is the world’s biggest shipper of wheat and Turkey its second-biggest customer for the grain.

Sanctions on some Turkish foods including tomatoes were imposed by Russia after one of their warplanes was downed near the Syrian border in November 2015. Although ties have much improved since then, Turkish ministers have voiced complaints at the pace at which trade links are being restored.

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