After mounting speculation during the last few days, Russia, the world's third largest wheat exporter, announced on 5 August 2010 a ban on grain exports for the next four-and-a-half months. This client alert summarises the likely impact on trade, plus gives some advice to parties on what to do next.
Cause and Effect
As highlighted in press reports, Russia has experienced record drought this year which has destroyed millions of hectares of its crops and caused wildfires across the country. As a result, Russia has cut its 2010 grain harvest forecast to 70-75 million tonnes, compared to 97 million tonnes in 2009, and has therefore implemented a temporary export ban in efforts to keep domestic grain prices low and preserve cattle stocks.
This move by Russia, in addition to its request to fellow members of a regional customs union – Belarus and Kazakhstan – to do the same, has caused global wheat prices to spike to two year highs. The UN's Food and Agriculture Organisation cut its 2010 global wheat forecast by about 4% and this has reignited fears that governments will begin hoarding their own supplies of grains at a time when memories of world-wide food riots in 2008 are still fresh.
Please see full alert below for more information.
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