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Russia: Wheat Export Ban Triggers Worldwide Panic

This post was commissioned as part of a Pulitzer Center/Global Voices Online series on Food Insecurity. These reports draw on multimedia reporting featured on the Pulitzer Gateway to Food Insecurity and bloggers discussing the issues worldwide. Share your own story on food insecurity here.

A new Russian ban on grain exports, including wheat, has created a panic over how the move will impact wheat prices and food security. Russia is among the world's top five wheat exporters, but crops were devastated this summer as the country was hit with a record-breaking heatwave, severe droughts and wildfires.

Golden Wheat

Golden Wheat by Dudua on Flickr (CC-BY-NC-SA)

Hans Timmer, blogging on a World Bank blog called Prospects for Development, says Russia’s grain production could fall by as much as a quarter from last year. As a consequence, Russian Prime Minister Vladimir Putin announced last month that the country will ban grain exports, including wheat, barley, rye and corn, starting August 15, as well as provide financial support for farmers.

Putin said last week that the ban will extend into 2011, in hopes of securing a reserve for next year and preventing an increase in domestic food prices. Meanwhile, international wheat prices have jumped by over 50 percent since June.

In an op-ed for the Kyiv Post, Lauren Goodrich says the ban may also ward off social and political unrest in Russia of the kind that occurred globally when food prices soared in the 2007-2008 crisis. But protests have already begun. Last week riots in Mozambique, caused by soaring bread prices, left 13 people dead and hundreds injured and there is growing anger in countries such as Egypt and Serbia. The wheat ban has also triggered panic elsewhere, fueling fears about global food shortages and further increases in wheat prices. Simon Monger, writing for the financial news website Sumfolio, elaborates on the ban's potential effect on prices:

“Russia’s ban on exporting the commodity…is expected to have a massive impact on worldwide prices. Prices hit a two-year high when Prime Minister Vladimir Putin announced the ban, while other countries followed suit and placed limits on their own exports.

While wheat prices have fallen marginally as U.S. farmers prepare to step up their production, a lot of uncertainty remains in the market. After all, a switch to produce wheat could lead to an oversupply of the commodity and an undersupply of other grains.”

This situation, coupled with an expected decline in wheat production in countries such as Canada, has also increased fears of further threats to the world's food security. A few days after Putin's announcement, the U.N. food agency the World Food Programme (WFP) told Dow Jones Newswires that the ban will reduce the amount of food aid they can deliver to developing countries, potentially leaving millions of the world's poorest people hungry. The WFP provided food for more than 100 million people in 73 countries in 2009. Over a third of the 2.6 million metric tons of food they bought that year was wheat; around 95 percent of this wheat was sourced from around the Black Sea.

Anatoly Karlin, a Russian-born blogger and university student living in California, compiles media stories about the Russian drought and wildfires on his blog Sublime Oblivion. He expresses concern over how the current situation may harm the world's poorest countries.

“The [agricultural] depression [in Russia] may continue for another two years, if the earth is baked too hard for sowing the winter crop… Coupled with agricultural decline in other countries (e.g. floods in China reduced its rice crop by 5-7% this year) and rising food protectionism, social welfare in poor food importers like Egypt and Pakistan will plummet. The conditions aren’t in place for a repeat of the 2008 food crisis, but this does confirm that our age is now one of increasing scarcity.”

Panic has hit Russia too, not just about wheat but also over buckwheat. Though not technically a type of wheat, buckwheat is used as a grain and is a staple in Russia. Droughts have impacted the country's buckwheat crop, creating a buzz in the Russian blogosphere as prices rise. Alexey Kovalev, writing for The Guardian, reported two weeks ago that a one-kilo packet of buckwheat that used to cost about 20 Russian rubles (USD $0.65) now costs 40 or even 70 rubles, if available.

Moscow resident and political scientist Oleg Volodin says in his blog that food suppliers are contributing to the panic [Ru]:

Понятно, что с урожаем-2010, мягко скажем, проблемы – но “продовольственная паника” их только усугубляет. Давая поставщикам и торговым сетям прекрасный повод задирать цены – вызывая новую волну истерики “видите, дорожает!”. Кстати, если статистика не врет – продажи круп, макаронов и муки за последнюю неделю (!) выросли впятеро.

“It is clear that there are, to put it mildly, certain problems with the harvest in 2010. But the “food panic” only makes them worse. It gives a reason for suppliers and retailers to raise prices, causing a new wave of hysteria: “Look, it’s getting more expensive!” By the way, if the statistics don’t lie, the sales of cereal, pasta and flour have grown fivefold (!) within the last week.”

Besides stirring panic, driving up prices and potentially impacting food security, some economists say Russia's grain ban will also be detrimental in other ways. Simon Black, writing on EconomicPolicyJournal.com, elaborates on these consequences:

“In an attempt to curtail this inflation, the government has decided to impose an export ban, effectively preventing Russian farmers from generating the highest profits for their produce. This sort of thing has been tried time and time again, most notably with Argentina's recent beef export ban. It always ends badly– producers go bankrupt as a result, people lose their jobs, the economy suffers, and long-term food production actually falls… but the politicians never learn. At a minimum, Russia will suffer significant damage to its reputation as a place to do business.”

Despite the panic, world wheat stocks still remain above 2007-2008 levels and the U.N. Food and Agriculture Organization says there is currently no need to worry about a new global food crisis. In light of this, Azamat Abdymomunov, a public policy adviser from Kazakhstan blogging on KnowledgeMap, explores what all the fuss is about. Russia expert and University of Houston research fellow, Paul R. Gregory, blogging on What Paul Gregory is Writing About, says that now that market forces are directing Russian agriculture, instead of the state, there's less reason to worry:

“Consider the effect of the return to market agriculture on the Russian people. The great Soviet famine of 1932-33 saw a loss of grain output of around twenty percent – a similar figure to the predicted decline of this year. The immediate result was the loss of six million or more lives…In 2010, the worst that the Russian people face is higher food prices. Russia is part of the world economic community. In the worst case, it can import grain this year and resume exports when weather conditions return to normal.”

The U.N. Food and Agriculture Organization announced last week that it will hold a special meeting of member countries on September 24 in Rome, Italy, to discuss rising wheat prices and to better gauge the food supply situation.

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