MOSCOW (Reuters) — Russia may be forced into protecting domestic bread prices from the country’s currency crisis later in the 2014-15 marketing year, analysts said, challenging government pledges to avoid curbs on grain exports.
Agriculture Minister Nikolai Fyodorov said on Tuesday that Russia, one of the world’s key wheat exporters, would only use its grain restocking program to regulate exports, which are running at a record pace due to a slump in the rouble.
“I think the minister is quite honest when he says this, but life can force him to change his mind,” said Andrey Sizov, the head of SovEcon agriculture consultancy.
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The minister’s comments are a step back from what he said last week when he signaled Moscow would consider all options to restrain exports except an embargo, which Russia used in 2010 when its crop was hit by drought.
Russia used a protective duty on wheat exports in 2008, but recent comments from officials suggest that Moscow will try to keep out of trouble with trade powers and the global export market by using less heavy-handed measures.
“We are not discussing any other options (to restrain grain exports),” Fyodorov told a news conference on Tuesday.
Officials said previously Moscow may consider imposing a floating tariff as a measure of last resort in 2015, while its phytosanitary regulator may tighten export rules in general and limit grain exports through companies registered offshore in particular.
Fyodorov said on Tuesday he was awaiting final government approval for a plan to raise prices at which the state purchases grain for its stocks.
The ministry plans to increase the price for third-class wheat in the European part of Russia to US$140 per tonne, Fyodorov told reporters.
“This level is too low for the current market, they will not be able to buy significant volumes,” Sizov said. The price for this type of wheat in the region, on an ex-works basis, was at 11,175 roubles per tonne at the end of last week.
The ministry aims to buy a further 3.5 million tonnes of grain to replenish its own stocks, which are now at a level of 1.5 million tonnes, Fyodorov added.
“This new (state) price is significantly lower than the market price, which is not good for all market participants as it raises the possibility of using administrative resources,” said Dmitry Rylko, the head of IKAR consultancy.
Sizov agreed, adding that he did not expect any grain export curbs until mid-February.
Russia could export 30 million tonnes of grain this 2014-15 marketing year, starting July 1, without hitting domestic supplies, the ministry says. So far the country has exported 19 million tonnes of grain, including 15 million tonnes of wheat.
Fyodorov said the ministry could discuss the problem of grain sales via shell offshore firms in the future but promised to avoid “snap decisions.”
Depending on how the restrictions are implemented, this move could be a noticeable restriction on Russian exports, as millions of tonnes of Russian grains are exported via offices in other countries, especially Switzerland, a German trader said.
However, the business could also be switched back to Russian offices fairly quickly so the impact could be short-term, he added.
