Putin says no grain exports before 2011 harvest

Russia abruptly signaled Thursday it would extend a grain export ban until late 2011 and ordered authorities to prevent speculators driving up food prices after the worst harvest in years.

Prime Minister Vladimir Putin's surprise statement on the export ban -- which had been due for review after December 31 -- puzzled analysts and helped send benchmark Chicago wheat prices higher.

"I would like to note that the lifting of the export ban can only be considered after next year's crops have been harvested," Putin told a government meeting. Amid speculation that he might have misspoken, his spokesman confirmed the statement.

Russia banned grain exports from August 15 to December 31 as a historic drought drove grain harvest forecasts down to about two-thirds of last year's figure, stoking fears of sharp food-price increases that could become a political liability.

In a sign of jitters, President Dmitry Medvedev ordered law enforcement agencies to stop speculators driving up prices and pledged help to ensure affordable food staples.

Putin's statement indicated the grain export ban would be extended by many months. Russia will harvest next year's crop by November 2011.

Surprised analysts said Putin might have meant to refer to the 2010 harvest. "It may well be a slip of the tongue," said Andrei Sizov Sr, CEO of SovEcon agriculture analysts.

But Putin's spokesman Dmitry Peskov, asked whether Putin meant the ban could not be lifted until next year's crop is harvested, told Reuters, "That was what was announced by Putin."

The Kremlin has sent mixed signals about the ban. Medvedev said last month the ban could be lifted before its planned December 31 expiry, depending on the harvest while Putin had said it could last into 2011.

This year's harvest is expected to fall to 60-65 million tons, after what the state weather agency says is Russia's worst drought in over a century ,from 97 million tons in 2009, although officials say there is enough grain to feed the people.

"Price Shock"

Russia's leaders are worried that recent price rises for staples such as flour, buckwheat, pasta and meat following the worst drought in at least a century could undermine the Kremlin's support ahead of the 2012 presidential election.

The summer drought will lead to a "price shock" for three to six months though inflation should be 7 percent for the year, the central bank said Thursday.

Medvedev, meeting senior government and regional officials, said speculators were driving up prices for certain foods.

"The speculators need to be caught," Medvedev said at the meeting in Saratov, a city on the Volga river in an agricultural region hit by the drought. "There are no objective reasons for the current changes in price" for food products.

"The situation should be kept under control by the government and regional leaders... If the situation changes I will take the decision to ensure our citizens have quality and affordable food... This is a priority for the state."

Medvedev said Russia, the world's third largest wheat exporter before this year's poor harvest, would seek to regain its position on world markets in the future.

Agriculture Minister Yelena Skrynnik set an ambitious target to increase the harvest to 85-90 million tons of grain in 2011. Medvedev said there was enough grain with carryover stocks of some 21-25 million tons.

Medvedev has toured villages, dairy farms and meat processing plants in recent days in a bid to reassure Russians, who still remember the empty shelves and soaring food prices around the time of the 1991 collapse of the Soviet Union.

Medvedev said he was particularly concerned about the price of buckwheat, which millions of ordinary Russians eat often.

"People are buying up this buckwheat from big retailers in the evenings, using sacks to fill up their trucks, and then selling it in small shops and markets," Medvedev said.

"Those who are involved in hiking up prices, ... in earning unjustified profits, should be dealt with by prosecutors, by the police, by the anti-monopoly and tariff services," he added.

The Russian ban and grain export restrictions in Ukraine have sent world prices soaring. But Ukraine's wheat exports nearly doubled to 430,000 tons in August despite informal export limits by the customs service, analyst UkrAgroConsult said Thursday.

[Source: By Gleb Bryanski and Denis Dyomkin, Reuters, Moscow and Saratov, Russia, 02Sep10]

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