Russia considers grain export curb to keep prices down

Harvesting wheat in the fields of the Bezmenovsky production site of Siberian Agrarian Holding (SAHO) in the Cherepanovsky district of the Novosibirsk Region. (RIA Novosti/Alexandr Kryazhev)
Russia doesn’t plan to impose grain export limitations at the moment because of soaring domestic prices, but Russia’s deputy PM Arkady Dvorkovich says it is considering market interventions to regulate prices.

Dvorkovich stressed that any market limits

“don’t make any sense and won’t improve the situation in the market”.

His comment came hours after Minister of Economy Development Andrey Belousov said that “it's quite possible the government will decide to restrict grain exports,” if the prices at the domestic market continue soaring.

Domestic prices for Russian third-class milling wheat may rise to $290 per tonne by the end of the year, from the current $260, Belousov said, adding that the government will discuss the issue "this autumn". Earlier this year Russian officials repeatedly said that they won’t introduce any limits, despite fact that a severe drought destroyed a quarter of this year’s grain yield.

Meanwhile, experts agree with Dvorkovich. “Export restrictions are not the best option,” Aleksandr Korbut, Vice-president of Russian grain union told RT. “Higher grain prices are very attractive for grain producers as it stimulates growth and attract investment into the sector”.

Korbut pointed out that imposing export limits won’t help to curb grain prices, but could result in the opposite effect. “Russia is the world leading food supplier, so any export limitations will push prices up worldwide as it was in 2010. The prices have already grown on speculations about the drought in Russia this year,” he explained.

A price surge in global markets would eventually lead to a price hike in the domestic market and speed up inflation, Korbut stressed. “The Russian state has more effective tools, such as selling grain from the intervention fund to keep prices down,” he added.

In 2010 Russia, the world’s second biggest grain exporter, introduced an export ban after an unprecedented drought damaged the harvest, reducing it to just 61 million tons. The move shocked the market sending prices soaring worldwide.
The government expects this year’s grain harvest to be between 72 million and 73 million tons, down from a record 94.2 million tons last year. If it drops to 70 million tonnes, Russia's exportable surplus would be around 10 million tonnes, said Belousov.