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Russian ministry seeks to limit grain exports

Reuters, 15.01.20

MOSCOW, (Reuters) – Russia’s agriculture ministry is looking to set a non-tariff quota for grain exports of 20 million tonnes in January-June, it said in a statement on Tuesday, adding the quota would be scrapped later in the most active part of season for trading.

This follows comments last month by the ministry that Russia, the world’s largest wheat exporter, was looking for a new way to restrict grain exports at the level of its exportable surplus under “certain market conditions”.

The agriculture ministry’s draft, which is yet to be reviewed by the government, sees the quota at 20 million tonnes of grain, which Russia can export without damaging domestic market in Jan. 1-June 30, 2020, the ministry said.

The mechanism should be used in Jan-June only, while exports should be free from it in July-December, it added. Russia’s new crop usually start arriving into the market in early July.

The priority of the ministry is the food security of the country, so it sees as important that favourable external conditions do not lead to shortages of grain in the domestic market, the ministry said.

Russian grain exports are so far down 18% this season compared with a year ago, and export prices for Russian wheat are currently at this season’s high.

Russia exported 25 million tonnes of grain in July-December, 2019, which was the first half of the 2019/20 marketing season, the ministry said. It expects Russia to export 45 million tonnes of grain in the 2019/20 season.

Russia’s January-June grain exports are likely to be lower than 20 million tonnes, but “the precedent is unpleasant,” said Andrey Sizov at SovEcon agriculture consultancy: “The more regulation there is, the more unpredictable and risky it gets for the entire grain sector.”

IKAR, another consultancy in Moscow, sees Russia’s grain exports at 15-17 million tonnes for the period, its head Dmitry Rylko said: “So the measure is quite technical, it will not have any impact, except a moral one, in 2019/20.”

Chicago wheat prices, a benchmark for this market, are up 1.2% on Tuesday.

“The fact the Russian government is again looking at some kind of grain export restrictions is one of the factors supporting wheat in Chicago today along with the French rail strike and large international tenders,” a European trader said.

“The gradual build up to Russian export restrictions has started in similar ways in the past.”

In 2010, Russia shocked world markets with a total ban on grain exports after a poor crop. In 2015, it used informal intervention to limit exports. Since becoming the world’s top wheat exporter, it has kept a grain export tax, which is at zero now but can be raised quickly by the government if needed.

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