Putin bans Russia grain exports due to drought

5th August 2010, Comments 0 comments

Russia, one of the world's top wheat exporters, will impose a temporary ban on grain exports until December 31 due to a record drought, Prime Minister Vladimir Putin announced on Thursday.

"In connection with the unusually high temperatures and the drought, I consider it right to impose a temporary ban on the export from Russia of grain and other products produced from grain," Putin told a government meeting.

Russia, currently the world's number three wheat exporter, earlier this week slashed its grain harvest forecast to 70-75 million tonnes owing to the worst drought for decades.

Last year, Russia exported 21.4 million tonnes of grain and observers had already warned this risks being sharply lower this year owing to the drought.

The prime minister's spokesman Dmitry Peskov said that the embargo would come into force from August 15 and would remain in place until December 31, the Interfax news agency reported.

"We must not allow an increase in domestic prices and must preserve the headcount of our cattle," said Putin in comments broadcast on state television.

Putin said that grain from the government's intervention fund would be handed out to the regions most in need without any auction.

He also said that Russian agriculture producers who had suffered as a result of the drought would receive financial aid totalling 35 billion rubles (1.17 billion dollars).

Some 10 billion rubles (335 million dollars) of this would be direct, free aid while 25 billion rubles (837 million dollars) would take the form of a three-year budget credit at advantageous rates, he added.

Concerns about Russia -- coupled with a drought that has also hit Ukraine and Kazakhstan as well as a low harvest in Canada -- have already led to a spike in global wheat prices to two year highs.

The severity of the drought has seen states of emergency declared in 27 Russian regions and dealt a major blow to its ambitions of ramping up its global market share over the next years.

The Russian Grain Union has given an even bleaker forecast on this year's harvest that the ministry, putting it at only 72-78 million tonnes.

It also warned that in a worst-case scenario, exports could nearly halve this year, giving a range of 11 million tonnes to 19.5 million tonnes.

Russia's average annual domestic consumption of grain is estimated at around 77 million tonnes.

Russia plans to boost its market share significantly over the next years by modernising infrastructure, in particular storage silos, and exploiting land that was left fallow under the Soviet Union.

It had been aiming to more than double exports to 40-50 million tonnes a year by increasing supplies to grain-hungry consumers like Egypt.

Deputy Agriculture Minister Alexander Belyayev had Tuesday moved to calm markets by saying that "for the moment" Russia did not plan to impose export restrictions and insisting this year's exports would be "at the level of previous years.

"Exports are very easy to lose and very hard to win," he said then.

© 2010 AFP

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