Russia opts for market forces over export ban The Kremlin has let the market to do its job. Russian wheat exports have slowed down to a trickle this month after prices in the port of Novorossiysk, the country's major export terminal in the Black Sea, surged to a 20-year high recently. The rally came after a drought that devastated the cereal crop. The Kremlin, which in 2010-11 imposed a brutal export ban that triggered a large rally in agricultural commodities prices globally, has this time let the market work, allowing domestic Russian wheat prices to increase significantly. The free-market policy has come in spite of constant worries by the trading community that Moscow would ultimately restrict exports. The worries were exacerbated by mixed messages from the Kremlin, including a warning from Andrei Belousov, Russia's economic development minister about an export ban. However, the Kremlin has so far refrained from intervening, allowing the price to rise to the point in which the cost is the main export restriction. "Due to skyrocketing domestic grain prices, Russian wheat is becoming less competitive in world markets, and this is expected to result in a slowdown in wheat exports in October," said the US agricultural attaché based in Moscow in a recent report. "This grain export slowdown will be exacerbated in November and through the winter months due to continued tightening stocks and seasonal weather-caused logistical problems at Russian ports," the attaché added. The question is whether Russia would continue to allow market forces to dictate export flows after neighbouring Ukraine, another top wheat exporter, last week decided to impose a de facto export ban from mid-November. Russia will this year harvest its lowest wheat crop in nearly a decade due to the drought. The US Department of Agriculture puts the country's wheat harvest at 38m tonnes, the lowest since 2003-04 and 40 per cent below the record of 63.7m tonnes in 2008-09. In a normal year, Russia is the world's third largest wheat exporter, playing a crucial role in supplying food-deficit countries of the Middle East and north Africa such as Egypt, the world's largest wheat importer. The shortage pushed benchmark wheat prices in Novorossiysk in late September to $355 a tonne, putting the commodity about $20 above cheaper origins. "Russia has disappeared from the Egyptian import tenders," says a Geneva-based senior grain trader. It is too expensive compared to European wheat. Another senior trader added: "The Russian domestic market is currently well above the world market so in theory not much should be exported from now on." After meeting domestic needs, grain traders estimate that Russia would be able to export in 2012-13 about 8m tonnes of wheat. Of that, about 6.5m tonnes were already shipped between July, the start of the harvest, and the end of September.