Russia's plan to extend its grain export ban destabilises markets but does not bring closer a repeat of the 2007/2008 food crisis, a senior UN economist said on Friday after seven people died in food riots in Mozambique.
Wheat output shortfalls in drought-hit Russia, last year's No. 3 exporter of grain, drove world wheat prices to two-year highs this summer and sparked fears of food price spikes.
"It is true that Russia is thinking about extending the embargo, but it still does not mean that we are going to have a crisis," Abdolreza Abbassian, economist at the United Nations' Food and Agriculture Organisation (FAO) told Reuters.
Russia's Prime Minister Vladimir Putin said on Thursday the export ban — which had been due for review after December 31 — would be extended until late 2011, puzzling analysts and helping send wheat prices higher.
"Actions like this will simply go against the stability (of grain markets)", Abbassian, who is also secretary of the FAO's Intergovernmental Group on Grains, said in a telephone interview.
"It does highlight a very big problem here: a very large exporting country with a great influence on the market can make unilateral decisions like that. It causes disturbances of the market," he added. Abbassian said he hoped Putin meant to say the ban could be extended if the situation worsened: "I still hope that there is something lost in translation."
Calm was restored in Mozambique on Friday after two days of rioting, triggered by a spike in bread prices there, in which seven people, including two children were killed, 288 injured and which left millions of dollars of damage.
TIGHTENING SUPPLIES
The FAO has said after two years of plentiful crops around the world the situation on global markets remained different from the food crisis of 2007/2008, which sparked food riots in developing countries and panic buying in the wealthier world.
FAO's Food Price Index, which tracks monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar — hit a two-year high at 176 points in August but was still 38% below its peak reached in June 2008.
Benchmark wheat futures on the Chicago Board of Trade are also well below August peak of $8.41 a bushel, trading just below $7.00 on Friday. Prices rose as high as $13.34-1/2 in February 2008 but higher global stocks mean that a return to those lofty levels appears unlikely, analysts have said.
Abbassian said global grain supplies remained solid and the markets should settle down soon with strong crops in other major producers offsetting output shortfalls in Russia, which has been hit by its worst drought in over a century.
However, the International Grains Council last week cut its forecast for the 2010/11 global wheat crop by 7 mln tonnes to 644 mln, mainly to reflect a lower estimate for Russia's crop and trimmed its wheat stocks view.
"This is still the third largest wheat crop ever and ending stocks are 63 mln tonnes above the level seen in 2007," UK merchant Gleadell Agriculture said in a market note on Friday, noting the IGC forecasts.
Wheat output forecasts have been cut in major producers Germany, Argentina and Australia due to bad weather.
Heat is expected to stay in the southern part of European Russia, the country's main breadbasket, in the next couple of days, increasing risks to winter sowing.
