Russia's agricultural ministry will meet Friday to discuss limiting wheat exports as the country's key Black Sea-producing region has been wilted by drought, but few believe it will repeat the total ban on exports it implemented in 2010 during similar drought conditions.
The prospect of Russia, the world's third-largest wheat exporter, not having enough wheat to export after its domestic demand is met would affect bread prices in the Middle East and North Africa because they would have to buy more expensive wheat from major producers like the U.S., Canada, France and Australia. Russia's 2010 export ban helped cause price spikes and bread protests in volatile areas of the Middle East, like Yemen and Egypt.
On Wednesday wheat prices rallied for the first time in six sessions, attributed to speculation of a move by Russia to curb exports. However, the rally also came a day after wheat slid to its lowest level since September on the announcement by the Egyptian government's commodities authority that it purchased 180,000 metric tons of wheat from Russia and Romania. Russia is a major competitor for U.S. wheat, so the market viewed this as a blow to the world's largest wheat producer and exporter. Egypt is the No. 1 buyer of the grain; the desert country cannot feed its population from its national production.
The prevailing sentiment is that Russia will not implement a total export ban.
"We do not think that an outright ban is likely either from Russia or Ukraine," said Muktadir Ur Rahman, commodities specialist for Capital Economics, in a research note on Wednesday. "Any other forms of export restrictions are unlikely to be imposed until next year, when we expect the global market to be well supplied with harvests from elsewhere"
Russia's total grain crop, of which wheat is the largest portion, is expected to be down 27 percent from the 94 million tons grown last season, according to ministry figures released Wednesday. Few, however, believe Russia will repeat a total ban on exports as it did two years ago, when the country produced 41.5 million tons of wheat; this year's yield could be similar.
"The Kremlin is likely to be subtler this time, combining administrative measures that would slow the flow of grain overseas to a trickle," writes Javier Blas in the Financial Times' "Commodities Note" column.
Last week the head of agricultural trading at Baar, Switzerland-based Glencore International PLC (London: GLEN), Christopher Mahoney, said he believed Russia would run out of exportable wheat within the next three months. Glencore is the world's largest commodity trader.
Mahoney also invited staunch criticisms from the United Nations Food and Agriculture Organisation, Oxfam International and other aid agencies after he said drought and the food crisis will bring about good business opportunities due to "high prices, lots of volatility, a lot of dislocation, tightness, a lot of arbitrage opportunities."
"Glencore's comment that 'high prices and lots of volatility and dislocation' was 'good' gives us a rare glimpse into the little-known world of companies that dominate the global food system," Jodie Thorpe of Oxfam told the Independent.