Fears mount on food price impact of Russian drought

The UK is warning that Russia’s drought could cause a double-digit percentage rise in food prices before Christmas.

Russia is a major food exporter, but record temperatures this summer are expected to halve exports. There are also fears the government could start an export ban to protect domestic supplies.

Some experts say the food price inflation – non goods like wheat, dairy and meat – is “scary” and could push the country into another recession.

But the president of the Russian Grain Union, Arkady Zlachevsky believes, that exports will not suffer much under the current conditions and says there is hope that Siberian crops will help improve the total output.

“The most pessimistic export forecast is 11 million tones. No one has a more pessimistic outlook but we think that exports will be in a region of 14 to 15 million tons. However, it will depend on a level of reserves we have. We estimate the total output levels to be around 75 to 76 million tons on average. The European region of Russia has already lost all it can but this number could increase if we have favorable weather conditions in Siberia.”

Russia has already agreed to sell 180 thousand tones of wheat to Egypt. The African state, the world's largest importer, shunned a similar offer from the United States, and grain prices have shot up on the news. The head of Russian grain union believes the prices are overheated.

“The fundamental factors do not support current grain prices. Last week we reached $240 per ton, but this price is quite groundless. According to the latest forecast of the Global grain council, grain reserves will reach 192 million tons this year, compared to last year’s record volume of 197 million tons. Is that a really big difference if the decrease is just 5 million tones? But the average price has jumped from $180 to $240.”