ADVERTISEMENT

ADVERTISEMENT

Russia might break promise to avoid curbing grain export

MOSCOW -- Russia might be forced into protecting domestic bread prices from the country's currency crisis later in the 2014 to '15 marketing year, analysts say, challenging government pledges to avoid curbs on grain exports.

MOSCOW -- Russia might be forced into protecting domestic bread prices from the country's currency crisis later in the 2014 to '15 marketing year, analysts say, challenging government pledges to avoid curbs on grain exports.

Agriculture Minister Nikolai Fyodorov said on Dec. 16 that Russia, one of the world's key wheat exporters, would only use its grain restocking program to regulate exports, which are running at a record pace because of a slump in the rouble.

"I think the minister is quite honest when he says this, but life can force him to change his mind," says Andrey Sizov, the head of SovEcon agriculture consultancy.

The minister's comments are a step back from what he said last week when he signaled Moscow would consider all options to restrain exports except an embargo, which Russia used in 2010 when its crop was hit by drought.

Russia used a protective duty on wheat exports in 2008, but recent comments from officials suggest that Moscow will try to keep out of trouble with trade powers and the global export market by using less heavy-handed measures.

ADVERTISEMENT

"We are not discussing any other options (to restrain grain exports)," Fyodorov said Dec. 16.

Officials previously said Moscow might consider imposing a floating tariff as a measure of last resort in 2015, while its phytosanitary regulator may tighten export rules in general and limit grain exports through companies registered offshore in particular.

Raising prices

Fyodorov says he is awaiting final government approval for a plan to raise prices at which the state purchases grain for its stocks.

The ministry plans to increase the price for third-class wheat in the European part of Russia to 10,100 roubles ($140) per metric ton from 6,750 roubles, Fyodorov says.

"This level is too low for the current market, they will not be able to buy significant volumes," Sizov says. The price for this type of wheat in the region, on an ex-works basis, was at 11,175 roubles per metric ton at the end of last week.

The ministry aims to buy a further 3.5 million metric tons of grain to replenish its own stocks, which are now at a level of 1.5 million metric tons, Fyodorov adds.

"This new (state) price is significantly lower than the market price, which is not good for all market participants as it raises the possibility of using administrative resources," says Dmitry Rylko, the head of IKAR consultancy.

ADVERTISEMENT

Sizov agrees, adding he did not expect any grain export curbs until mid-February.

Russia could export 30 million metric tons of grain this 2014 to '15 marketing year, starting July 1, without hitting domestic supplies, the ministry says. So far the country has exported 19 million metric tons of grain, including 15 million metric tons of wheat.

Fyodorov says the ministry could discuss the problem of grain sales via shell offshore firms in the future but promised to avoid "snap decisions."

Depending on how the restrictions are implemented, this move could be a noticeable restriction on Russian exports, as millions of metric tons of Russian grains are exported via offices in other countries, especially Switzerland, a German trader says.

But the business could also be switched back to Russian offices fairly quickly so the impact could be short-term, he adds.

What To Read Next
Students at the college in Wahpeton, North Dakota, will be able to get two-year applied science degrees in precision agronomy and precision agriculture technician starting in the fall of 2023.
Researchers with North Dakota State University and the U.S. Department of Agriculture are working to see if a particular variety of Lewis flax has the potential to be a useful crop.
No one was seriously injured when the top exploded off the silo because of built-up gasses from the burning corn.
Iowa-based Summit Carbon Solutions says its pipeline project will help ethanol plants. The project aims to capture greenhouse gas emissions and pipe the CO2 to western North Dakota for underground storage.