Ruble volatility leads grain exporters to halt purchases
Major grain exporters in Russia, a top supplier to the world market, have stopped buying stocks from Russian farmers in the hope that it would squelch a surge in the domestic price of wheat due to a plunge in the ruble.
It is the latest in a series of developments that analysts have interpreted as government attempts to slow wheat exports without resorting to an outright ban in order to keep the politically sensitive price of bread from soaring.
Russia's national association of agricultural exporters said in a statement it would refrain from new purchases "until the situation concerning the availability and the price of cereals stabilises" and called on non-member exporters to also follow its policy.
Russia is normally the world's number three grain exporter, and enjoyed this year one of its best harvests ever at 104 million tonnes.
With world prices set in dollars, Russian farmers have an incentive to sell to exporters who can offer a more competitive price.
Even Russian farmers are affected by the ruble having lost nearly half of its value against the dollar this year, as most seeds and pesticides are imported.
Markets are worried that if too many Russian farmers try to export their crop and there is insufficient grain for the domestic market that Moscow might impose an export ban, as it did in 2010 following a bad harvest.
At the start of the week Agriculture Minister Nikolai Fyodorov dismissed the possibility of such a ban, but exports have dropped sharply in recent days.
According to Russian media, the veterinary and agricultural service is only issuing a small percentage of export certificates it normally does, without providing any official explanation.
And the national railway company has informed exporters that it is cutting back on grain shipments due to circumstances beyond its control, again without providing an explanation.
Analysts have interpreted these two developments as a covert effort by the government to reduce exports.
The business daily Kommersant reported recently that the politically-sensitive price of bread could jump by 10 percent in the coming weeks as the Russians celebrate the holidays, prompting authorities to take action to ensure no abusive price hikes.