(Bloomberg) – Russia is getting creative as it seeks to stem a surge in grain exports amid the rout in the country’s currency that has pushed up the prices consumers pay for bread.
The country is slowing down shipments by denying certificates that grain sellers and buyers need after sanitary inspections, an association of Russian exporters said yesterday. Agriculture Minister Nikolai Fedorov said this week that it may scrutinize shipments through offshore companies, and the nation’s agriculture watchdog said last month it would block outbound cargoes it deems contaminated.
Russia, the world’s fourth-biggest wheat exporter, probably doesn’t want to risk pushing up prices with an official ban, according to Matt Ammermann, an analyst at INTL FCStone Inc. who focuses on the Black Sea region. While the country has said it won’t stop exports, the curbs may allow Russia to avoid a repeat of 2010, when it issued a 10-month embargo that saw wheat prices more than double.
“They want to do it by different means,” Vladimir Petrichenko, director general of market researcher ProZerno, said yesterday by phone in Moscow. “An embargo or export duties would obviously be too painful.”
Wheat climbed for a sixth session on the Chicago Board of Trade today and reached $6.77 a bushel, the highest since May. The global benchmark is still about 26 percent lower than the 2011 peak, when prices soared after the Russian embargo put in place when a drought slashed the wheat harvest.
Rail Shipments
Train shipments are also facing potential slowdowns. Russian Railways, the state rail company, has restricted deliveries at ports for grain destined for export, Interfax reported today, citing a telegram from the company.
“The most dramatic story in the agriculture markets is the rally in wheat prices owing to the Russian economic situation,” Christopher Narayanan, the head of agricultural research at Societe Generale SA in New York, said in an e-mailed note yesterday. “News of export licenses being denied and expectations of increases to the government purchase price to curb exports and build up domestic grain inventories in the face of rampant food inflation have helped this rally.”
Russia’s grain exports this season have surged about 33 percent from last year, government data show. At the same time, the plunging ruble means farmers will be less willing to sell their grain, according to INTL FCStone.
Grain Reserves
The Agriculture Ministry this week boosted the price it pays for grain to bolster state reserves. Russian bread prices have risen as much as 10 percent in the past month, according to retailers.
Russia is struggling to reverse a rout in the ruble, which has fallen about 45 percent this year amid plunging oil prices and sanctions imposed after the country’s annexation of Crimea. The currency rebounded yesterday as the government sold dollars and the central bank said it will help companies meet foreign-currency debt obligations.
President Vladimir Putin said today at an annual news conference that the central bank shouldn’t waste reserves on the market to help protect the currency and told Russians to brace for recession.
Russia is denying certificates for grain destined for countries other than Egypt, Turkey, India and Armenia, according to a letter from the National Association of Exporters of Agriculture Products, addressed to Deputy Prime Minister Arkady Dvorkovich. The trade group called the move a “covert form” of export restrictions.
Yulia Trofimova, spokeswoman for agriculture agency Rosselkhoznadzor, said by phone from Moscow that a blanket order has not been issued, while some denials may have taken place this week.
Russia’s wheat production from the crop harvested this year was 60 million metric tons, the most in five years, according to the London-based International Grains Council. Russia ranks as the world’s fourth-largest exporter of the grain, based on figures from the IGC and FranceAgriMer.
