Russia deputy PM sees no need for grain export limits

Russia has no grounds to ban grain exports this year, a senior government official said Tuesday as a top analyst said drought damage and low stocks could slash Russian wheat exports to just 10 million tonnes.

A newly formed commission on food security is due to meet on Wednesday under the chairmanship of Deputy Prime Minister Arkady Dvorkovich, in charge of industry and commodity producers in the new government of Prime Minister Dmitry Medvedev.

"There will be a meeting on the grain market," Dvorkovich told Reuters on Tuesday. "I see no basis for limiting exports."

Russia banned exports in 2010 to restrain prices and ensure domestic supply in response to a catastrophic drought that destroyed a third of the crop.

The ban shook the trust of longtime consumers and Russia has since sought to assure markets that a repeat is unlikely.

But a spring drought in the key export regions of on the Black Sea slashed yields, and later spread to parts of the Volga River valley and Siberia, renewing questions about export restrictions. Market sources cited a Goldman Sachs report as saying they appeared possible this year.

"The state’s opportunities to regulate the domestic market through export limits look rather limited," Andrei Sizov Sr., chief executive of Russia’s SovEcon consultancy, said. "After joining the World Trade Organization, rapid imposition of export duties, especially ‘floating’ ones, is practically impossible, and a ban on exports is politically unacceptable."

Sizov slashed his harvest forecast by several million tonnes to 78.5-81.5 million tonnes, down from 94 million tonnes last year, and said Russia may export just 10 million tonnes of wheat this year as grain exports fall by half from last year’s record 28 million tonnes, which included over 21 million tonnes of wheat.

"At forecast production levels, with a reduction in carryover stocks, and an insignificant increase in domestic consumption, Russian grain exports in the 2012-13 agricultural year could fall by half to 13-14 million tonnes, including 10 million tonnes of wheat," Sizov said.

"These volumes would be achieved through a significant increase in external prices, which will support export, regardless of rising domestic prices."

Exports have been off to a slow start this year as Russian grain prices have shot up with world prices, and traders are waiting for prices to drop.

— Darya Korsunskaya and Melissa Akin are Reuters correspondents in Moscow.

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