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In a surprise and unexpected move, Russian Prime Minister Vladimir Putin told Reuters that he was extending the grain export ban until 2011. "I would like to note that lifting of the export ban can only be considered after next year's crops have harvested," Putin said according to Reuters.
Russia is now suffering through its worst drought in nearly 100 years. Grain harvest have been cut by two thirds, down to 60-65 million tons from 97 million tons in 2009.
Russia is especially worried about having adequate grains to feed its people. There is a crackdown on speculators who try to take advantage of the shortages.
Already, Russians are hoarding grain supplies, especially buckwheat, which is a staple. Russian President Dmitry Medvedev ordered to prosecute and punish anyone trying to profit excessively from the shortage, according to Reuters.
The Russian central bank expects grain price inflation to be about 7% for this year.
U.S. wheat prices have skyrocketed when word of the drought and the Russian ban became known. A rally in wheat futures started at about $5.50 per bushel and shot up to $8.25 per bushel. Friday's September wheat futures traded at $6.89 per bushel, up 5 cents (each 1 cent equals $50.00.)
The U.S. has a bumper wheat crop this year. The Russian drought will keep prices high for our farmers and will stimulate exports.
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