Grain prices spiked after Russia revived plans for grain export duties amid fears that its surging pace of shipments would deplete inventories.
Viktor Zubkov, the Russian deputy prime minister who in June voiced proposals for a levy, said on Tuesday that the government was considering reviving the plan to prevent its grain stocks falling below 15m-16m tonnes.
While Russia has seen a sharp revival in its grains production from last year’s drought-affected levels of 61m tonnes – with Mr Zubkov pegging the harvest at 90m-92m tonnes and Prime Minister Vladimir Putin last week estimating the crop at 95m tonnes – keen prices have seen a surge in supplies leaving the country.
His said that Russia had exported 10.7m tonnes of grain since in July, the start of the 2011-12 crop year, lifting an 11-month ban on shipments imposed because of last year’s poor harvest.
On futures markets, thoughts of the removal of a fierce competitor from export markets added further fuel to a rally kicked off by talk of fresh Chinese buying of US corn and soybeans. December wheat leapt 8.8% in Chicago at one stage to a one-month high of $6.65 ¼ a bushel.
Tuesday’s grain prices at close
Chicago wheat: $6.60 ¾ a bushel, +8.1%
Chicago corn: $6.45 ½ a bushel, +6.6%
Chicago soybeans: 12.35 ½ a bushel, +4.9%
Paris wheat: E191.75 a tonne, +4.2%
London wheat: £151.00 a tonne, +2.5%
Chicago corn for December locked up the exchange maximum of $0.40 a bushel at $6.45 a bushel.
China is rumoured to have bought at least six-to-eight cargoes of American soybeans, with markets also echoing to talk that a key US government report published on Wednesday will reveal tighter numbers on domestic crop supplies than investors have priced on.
In Paris, November milling wheat closed up 4.2%, while London feed wheat fort the same month added 2.5%.
Mr Zubkov said Russia could "afford" grain exports in 2011-12 of 23m-24m tonnes, to leave sufficient stocks for domestic consumption.
Zubkov’s grain export sums
Carry-in stocks: 20m tonnes
Harvest: 90-92m tonnes
Total supplies: 110m-112m tonnes
Domestic consumption: 70m-72m tonnes
Min. end-year stocks: 15m-16m tonnes
Total domestic needs: 85m-88m tonnes
Leaves about 24m tonnes for exports
This still leaves room for the country to set a record, beating the 23.2m tonnes reached in 2008-09.
However, he declined to detail how his tax plan would restrict exports, beyond saying it would involve a "floating tariff" which would not be introduced this calendar year.
By then, 2011-12 exports may have reached 18m-19m tonnes, he said.
Sergei Ignatyev, the governor of the country’s central bank, in June urged a duty on exports once the price of third-grade milling wheat tops 6,500 roubles, then about $235 a tonne, a measure Mr Zubkov said at the time was "possible".
A levy on grain exports holds the potential for reaping a number of benefits for Russia, in underpinning domestic supplies, so keeping food inflation in check and fulfilling strategic aims to nurture its livestock industry.
Russia was the top importer of chicken until last year, when measures to boost domestic production bore serious fruit, and remains the biggest net importer of beef.
However, limits on grain exports threaten, for a second season, to deny growers the full benefit of international prices.
Russia’s step backwards from international markets also appears a fillip to an attempt by Ukraine to reignite its export performance, which has been severely weakened so far in 2011-12 by cargo levies which Kiev’sparliament voted last week to abolish.