Russia curbs grain exports to cool domestic prices

Moscow | Reuters — Russia, one of the world’s main wheat exporters, is taking steps to restrict grain exports in an attempt to cool domestic prices, as it tackles a financial crisis linked to plunging oil prices and Western sanctions.

In a meeting with grain exporters on Wednesday, Deputy Prime Minister Arkady Dvorkovich said the government was using all informal instruments to restrict grain exports, two sources familiar with the matter told Reuters.

Analysts say Russia is keen to avoid formal export curbs which might take time to implement and damage relations with its customers, but that it is stepping up other measures — such as quality controls — that can prevent grain leaving the country.

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“At the meeting today, exporters were told that all instructions are given to all parties involved to restrict grain exports and that grain should be going now to the domestic market,” said Andrey Sizov, the head of SovEcon agriculture consultancy.

A Russian grain exporters’ lobby — the National Association of Exporters of Agricultural Products — earlier wrote to the government to complain that the country’s phytosanitary service was only allowing exports to Egypt, Turkey, India and Armenia.

“This is nothing more than a hidden form of state regulation of grains,” the group said in a letter to Dvorkovich. Reuters obtained a copy of the letter.

Dvorkovich did not clarify whether any countries were exempt from the restrictions at the meeting with exporters.

Dvorkovich’s spokeswoman declined to comment on the meeting.

Earlier on Wednesday she said the government’s current task was to increase grain supply on the domestic market. She declined further comment.

The agriculture ministry had said on Tuesday it would avoid such curbs even though exports are at record levels following the rouble’s slide against the dollar.

Russia’s Veterinary and Phytosanitary Surveillance Service (VPSS) said on Wednesday it had started to pay “special attention” to the quality of grain sent for export.

It said it was issuing export certificates only when the quality conformed with the rules of importing countries.

Traders have forward contracts for Russian grain until April and say the country can export about 30 million tonnes without eating into its domestic needs, the grain export lobby group said.

The agriculture ministry has also put 2014-15 grain exports at 30 million tonnes. So far Russia has exported 19 million tonnes, including 15 million tonnes of wheat.

Effect on buyers

Turkey and Egypt are the largest buyers of Russian wheat.

The list of usual buyers of Russian wheat include more than 15 other countries.

“It’s a limited effective export ban,” a European trader said. “Vessels which have been loaded are now being told they cannot sail by the phyto authorities.”

Previously, Russia’s December grain exports were expected to be at 2.5 million tonnes to three million tonnes.

Shipments are unable to be transported to countries including Yemen, Georgia and Saudi Arabia, traders said.

“We are working on the consequences for our forward contracts since we won’t be able to apply force majeure,” one said.

Chicago wheat rose on Wednesday on concern over supplies from Russia, which the U.S. Department of Agriculture (USDA) forecasts will be the world’s fourth-largest exporter this year. On Tuesday trade sources said grain export certificates had been restricted for some countries.

Egypt, the world’s largest wheat importer, said it was confident Russia would honour all its wheat import contracts and that it would continue to include Russian wheat as an origin in its international tenders.

Reporting for Reuters by Polina Devitt, Sarah McFarlane, Nigel Hunt, Michael Hogan, Maha El Dahan, Jonathan Saul, Sybille de La Hamaide, Valerie Parent and Gus Trompiz.

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