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Wheat prices soar as Russia bans grain exports

With one-fifth of Russia's farmland destroyed by drought and wildfire, Prime Minister Putin has banned grain exports. The move, intended to keep domestic food costs down, has caused a spike in global wheat prices.

wheat

Russia has lost an amount of farmland the size of Portugal

Global wheat prices soared Thursday after Russian Prime Minister Vladimir Putin announced a four-and-a-half month ban on grain exports. With a fifth of the country's arable land destroyed by drought and fire, the move is intended to keep domestic food prices down.

Putin announced the ban at a cabinet meeting Thursday, saying it was a necessary step to protect Russian consumers from price hikes, despite the country's reserves of 9.5 million tons.

"We must not allow an increase in domestic prices and must preserve the headcount of our cattle," Putin said on state television in defense of the ban, which applies to barley, rye and corn, as well as wheat and other flours.


Record heat wave


The export moratorium is set to take effect on August 15 and last until the end of the year. Russia also asked Belarus and Kazakhstan, fellow members of a regional customs union, to make a similar move.


Russia's worst droughts in 130 years, along with wildfires that have claimed 50 lives, have decimated 10 million hectares (24.7 million acres) of Russian farmland.

Temperatures in the world's third-largest wheat exporter reached 40 degrees Celsius (104 degrees Fahrenheit) Thursday - and were expected to remain very high.


Russia earlier this week slashed its 2010 grain harvest forecast to 70-75 million tons. In 2009 it harvested 97 million tons.


Vladimir Putin

Putin wants to protect domestic food prices

Ban already sends markets soaring


The country's decision to ban grain exports sent the price of wheat soaring to its highest level in two years. The price had already risen considerably since early June, seeing its biggest one-month jump in three decades due to droughts in Russia, Ukraine and Kazakhstan and low harvest in Canada.


November milling wheat futures also shot up by 8.25 for the day on the Euronext securities exchange Thursday after Putin's announcement.


Within Russia, many wheat producers were dismayed at being denied access to global markets. "There can only be one comment: shock," said Vladimir Petrichenko, director of the Prozerno agricultural analytical firm.


"We will only be able to return to the global markets with a tarnished reputation, with losses," he told Interfax news agency.


The director of the Institute for Agricultural Market Studies, Dmitry Rylko, said that Russia's trade partners would not be left without grain. "There is enough grain on the global markets," Rylko told AFP. This year there has been a good harvest in the United States and Western Europe, for example."


Fires blaze on


Meanwhile, there is no end in sight for the fires that continue to threaten Russian homes and agriculture.


Strong winds have spread fires through central and western Russia, where a state of emergency has been declared in 27 regions due to drought.


Russian soldiers stationed near Moscow on Thursday rushed to bring rockets and artillery to safety from approaching flames, Interfax reported.


A firefighter works to extinguish a forest fire burning near a suburb of the town of Voronezh

Fires now threaten to release radioactive soil into the air

Officials are concerned the fires could release radioactive radiation. Emergencies minister Sergei Shoigu said there was a danger that soil in the Bryansk region, contaminated by the 1986 Chernobyl nuclear accident in neighboring Ukraine, could be swirled into the air along with ash, releasing harmful radioactive particles into the atmosphere.


"In the event of a fire there, radionuclides could rise [into the air] together with combustion particles, resulting in a new pollution zone," he said on state television.


Author: David Levitz (AP/AFP/dpa/Reuters)

Editor: Nancy Isenson

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