Russia ban sends wheat prices soaring
Russia announced on Thursday that it will ban all grain exports for the rest of the year, sending wheat prices soaring to a two-year high and raising the possibility of inflated food prices that could throw an already fitful global economy recovery off track.Updated: Aug 07, 2010 00:12 IST
Russia announced on Thursday that it will ban all grain exports for the rest of the year, sending wheat prices soaring to a two-year high and raising the possibility of inflated food prices that could throw an already fitful global economy recovery off track.
A severe drought and wildfires have destroyed one-fifth of Russia’s crop and forced the country to draw from emergency reserves.
In announcing the ban at a cabinet meeting in Moscow, Prime Minister Vladimir Putin said that Russia, one of the world’s largest wheat exporters, needs to “prevent a rise in domestic food prices.” He said he would decide after this year’s harvest whether to extend the ban, which covers exports from August 15 to December 31.
Internationally, wheat prices have increased nearly 50 per cent since June, fueling worries about a repeat of the food crisis in 2008 that triggered riots from Bangladesh to Haiti to Mozambique.
Prices of other crops, including barley, rice and corn, also rose sharply after Russia’s announcement.
In an era of free trade, export bans by countries are usually considered a last-resort measure to protect national interests. Indonesia, where whole forests have been levelled by wood processors, banned the export of raw logs.
India is considering a ban on exports of iron ore to secure its mineral wealth for its fast-growing economy. In 2007 and 2008, a number of countries, including Russia, restricted the export of grain as prices began to skyrocket.
While commodities analysts emphasised that there is no reason to fear another global wheat shortage, governments and companies worldwide are preparing for the worst. Grain harvests around the world have been devastated by unusual weather this year.
Russian wheat makes up about 11 per cent of global exports, but as of June there was an “abundance” of wheat inventories elsewhere that was more than enough to make up for the shortfall, Maximo Torero, a researcher at the International Food Policy Research Institute in Washington, said.
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First Published: Aug 07, 2010 00:11 IST