Russia to impose temporary ban on grain exports

Cereals burning near the town of Voronezh

Russia is to ban the export of grain from 15 August to 31 December after drought and fires devastated crops.

"I think it is advisable to introduce a temporary ban on the export from Russia of grain and other agriculture products made from grain," Russian Prime Minister Vladimir Putin said.

Russia, one of the biggest producers of wheat, barley and rye, exported a quarter of its 2009 grain output.

Mr Putin's announcement sent wheat prices to a 23-month high.

They had already hit 22-month highs earlier this week due to concerns about the impact of the drought and fires on Russian wheat exports.

However, many commodities analysts insist there is currently a surplus of wheat in global markets following record harvests in 2008 and 2009.

They say that speculators have been driving wheat prices artificially high because they are hoping to make a profit from the worries over Russian exports.

Analysts add that while there is likely to be a knock-on increase in bread prices in the short term - about five pence on the price of an average loaf in the UK - wheat prices should soon fall back down again.

They say this is because the US - the world's number one exporter - is predicting a bumper harvest of its current crop.

Extra help

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Russia is banning the export of grains including wheat, barley, rye and maize.

It will also ask its regional customs union partners - Kazakhstan, another leading grain exporter, and Belarus - to follow the suit.

Mr Putin said that grain from the state reserves would not be auctioned but would be distributed to regions with the greatest need.

"The aim in this case is not to make more money, but to aid those farmers that need help today," the prime minister said at a government meeting.

He added that the government would provide 10bn roubles ($335m, £211m) in subsidies and another 25bn roubles in loans to agricultural companies affected by the drought.

Meanwhile, the wildfires in Russia are showing little sign of abating.

Officials said on Thursday that fire crews were still fighting to extinguish nearly 600 fires in an emergency that has now claimed 50 lives.

Middle East markets

Russia produces a soft type of wheat that is unsuitable for making the traditional loaf of bread seen in the UK.

As a result Britain buys only a nominal amount of Russian wheat.

Russia instead sends most of its wheat exports to the Middle East, where they are used to make unleavened flatbreads.

Egypt is its largest export market, followed by Turkey, Syria, Iran and Libya.

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