Russia, Ukraine to Scrap Wheat Export Restrictions

1 June 2011

Moscow on Saturday announced that Russia would resume exporting wheat on 1 July, prompting a 4.6 percent fall in the global futures price for the commodity. In August 2010, Russia - the world's number three wheat producer - implemented an export ban on the commodity due to record low harvests resulting from severe drought.

Russian wheat exports for the 2009-2010 season were an estimated 18.5 million tonnes and Viktor Zubkov, Russia's deputy prime minister, said this year's exports could be as high as 15 million tonnes.

In addition to Russia's move, Ukraine announced it will lift wheat export quotas that were put into place a year ago and have had a significant impact on exports. However, the country is planning to implement a new regime of export duties up until 2012, meaning the positive impacts on wheat exports may be modest.

Wheat supplies are short and prices high this year due to unfavourable weather conditions in some of the main producers for the world market, including France and the US. But while Moscow's move will allow more wheat to enter the global market, the bulk of the exports will mainly consist of feed-grade wheat flowing to Asian importers, such as Indonesia, and Japan. Thus, supply of high-grade wheat used for pasta, bread, and other products destined for human consumption may not be significantly offset.

Food security experts say export restrictions contribute to price spikes and have argued for the need to restrict these and other measures on key commodities in order to tackle related problems. In the context of the flagging Doha round of the WTO, a group of net food importing countries (NFIDCs) have made a proposal to ban export curbs that negatively affect NFIDCs and least-developed countries (see Bridges Weekly, 6 April 2011).

According to the proposal, "export restrictions play a major role in fuelling soaring international food prices" and the food price increases "aggravate poverty levels and seriously threaten NFIDCs' food security." G20 agriculture ministers will address food security, including the role of export restrictions in this context, at a meeting from 22-23 June.

Overall, food prices remain at historical highs, despite an apparent levelling off and even some minor price decreases in May (see Bridges Weekly, 11 May 2011). For wheat, prices are 75 percent higher than they were a year ago.

According to a new report by Oxfam International, food prices will likely double over the next 20 years due to "rising food price inflation and oil price hikes fuelled by speculators, scrambles for land and water, and creeping climate change." The poorest people of the world, who spend more than 80 percent of their income, will be the hardest hit, Oxfam says. The development-focussed NGO says policy changes, such as limiting speculation on food commodities and scrapping support for biofuels made from food crops, will help combat the problem.

ICTSD reporting; "Wheat Falls on Russia's Plans to Remove Export Ban," WALL STREET JOURNAL, 31 May 2011; "Wheat Declines Most in a Week as Russia to End Grain-Export Ban," BLOOMBERG, 31 May 2011; "Analysis: Russian wheat to ease Asia's tight feed supply," REUTERS, 31 May 2011; "Ukraine removes grain export quotas," FINANCIAL TIMES, 25 May 2011; "Russia Lifting Grain-Export Ban May Fail to Alleviate Global Crop Shortage," BLOOMBERG, 30 May 2011; "Hunger crisis worsens, food system broken: Oxfam," REUTERS, 31 May 2011.

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