Russia's worst drought in a century has prompted the country - one of the world's biggest wheat growers - to ban grain exports for the first time in 11 years. The move sent already red-hot benchmark US wheat prices to a fresh 23-month high.
Prime Minister Vladimir Putin today announced a temporary ban on grain exports to keep inflation in check, pledging billions of roubles to the farm sector.
Putin signed an order banning exports of wheat, barley, rye and maize, as well as wheat and rye flour from August 15 to December 31, the government press office said. Russia plans to ask for a similar ban from customs union partners Belarus and Kazakhstan.
Trading in September wheat on the Chicago Board of Trade went into overdrive, rising by 60 cents to $7.85 by the close of the electronic session, a high for the contract and a 23-month peak for front-month prices.
Benchmark wheat prices in Chicago and Paris have now added 69% and 58% respectively since the start of July.
With Russia at the mercy of its worst drought since records began 130 years ago Putin pledged 10 billion roubles ($335m) in subsidies and another 25 billion roubles in loans to the agricultural sector, adding that grain from the government intervention fund will be distributed to regions.
Last year, buoyed up by bumper harvests in 2008 and 2009, Russia exported 18.3 million tonnes of wheat, a total only exceeded by the US and the EU, according to International Grains Council figures. But Russia's ambitions to take more market share have taken a dent from the drought.
Fear about a repeat of the 2007/08 food crisis when wheat prices topped $13 a bushel has been a major driver in the wheat rally, but the United Nations Food and Agriculture Organisation said yesterday that such concerns were not justified.
The FAO said world stocks, especially those held by major exporters, were enough to cover expected production shortfalls after two consecutive years of record crops.
