The Russian government imposed a ban on the export of grain from August 15 to December 31, after abnormally hot and dry weather destroyed the grain harvest in almost 11 million hectares of land across central Russia. Forecasts for this year's harvest have fallen as low as 60 million tons, 38% down on last year. Arkady Zlochevsky, president of the Russian Grain Union, addresses the deep concerns of Russian society - was the controversial export ban necessary and will it have the desired effect - and also looks at the future prospects for Russia’s grain market.
Samir Shahbaz: Good afternoon, Mr Zlochevsky.
Arkady Zlochevsky: Good afternoon.
Samir Shahbaz: The extraordinarily hot summer of 2010 forced the country's leadership to take the drastic measure of banning grain exports. Naturally, the question that generates the most interest is how this decision will affect prices and whether we can expect a sharp jump in prices after the ban is lifted?
Arkady Zlochevsky: First of all, I would like to point out that the decision about lifting the ban will be made much later. For now, the ban is valid until December 31, but it is still not exactly clear whether it will remain in effect. There is a chance that it may be extended. Price hikes are not expected. We have enough resources, and prices began to decline after the ban so it had the intended effect.
Samir Shahbaz: How do the Russian government’s actions conform with international law? Will we have to pay any fines or penalties, given that we are bound by contracts with many countries, or is this a normal occurrence that is spelled out clearly in our contracts?
Arkady Zlochevsky: The contracts usually contain a force majeure provision. A ban at the national level falls into this category, so the companies that signed these contracts cannot be held liable. This is not the problem. The problem is that we had a reputation as a reliable supplier, and now that reputation, if not destroyed, has been significantly damaged by the ban. The reason for this is not the ban itself, but how suddenly it was announced. As a result, many contracts remain open, including contracts with government organizations, such as the Egyptian state stock insurance company, as well as Jordanian procurement organizations. These contracts have not been executed and they cannot be under the ban.
Samir Shahbaz: Has the government resorted to such drastic measures in the past?
Arkady Zlochevsky: Until now, Russia had not declared a ban on exports. However, there was the period of 2007-2008, during the world food crisis, when duties were imposed on exports and remained in force from February to July 2008.
Samir Shahbaz: We all remember the roaring 1990s, when the country was in economic decline, which, of course, affected the grain industry. How self-sufficient is Russia in terms of grain production now?
Arkady Zlochevsky: All the latest years of the current century, we were more than self-sufficient in terms of grain production. Russia was one of the largest wheat exporters. Our first year of massive exports was 2002 – 17.6 million metric tons. That was a record for Russia's grain industry at the time. But in recent years we have managed to surpass this achievement. The year before last Russia exported more than 24 million tons, which is the current all-time high.
Samir Shahbaz: What is our ranking in the world grain market in comparison with other countries?
Arkady Zlochevsky: In terms of wheat, then we are second or third after the U.S., which is the leader in this category, exporting about 30 million tons. Speaking in terms of grains in general, there are countries that export more than 50 million tons, even if only in monocultures; for example, U.S. corn exports.
Samir Shahbaz: If weather conditions do not improve, and in 2011 there is another drought, albeit not on this scale, then we will probably need to maintain the ban on grain exports. How long will reserves hold out until we will have to import grain?
Arkady Zlochevsky: Our reserves are more than enough to last us for the current season. There was a 24-million-ton surplus that carried over as of July 1, 2010, a record high. So there won’t be any problems this season. There is enough grain for us to meet domestic needs in full. The foundation for next season will be laid during autumn sowing. Until now, the weather has not been very conducive to a good harvest, but weather forecasters promise moisture and rain, and this is critical for the autumn sowing. If there are shortages of winter crops, we will compensate for this during spring sowing.
We hope that such extraordinary high temperatures, droughts and wildfires will not return next season. If you recall, last year we also had a drought, and in several regions a state of emergency was declared. And yet we harvested 97 million tons and were able to export 21.5 million tons.
Samir Shahbaz: Some experts and commentators, including some of our colleagues, are raising a commotion about how the government, yourself included, is allegedly holding information back and the situation is actually much worse than the official statements make it out to be. Can you dispel these doubts?
Arkady Zlochevsky: I believe that the government has correctly assessed the situation, and what’s more, they have been a step ahead of events in a sense, since the ban was imposed as a preventive measure. There is no grain shortage in Russia and still no threat of a shortage.
A lot will depend on the weather. Extremely bad weather is always a possibility, and if this comes to pass, then the ban on exports will likely remain in place so that we can meet domestic demand. I consider the current export ban as a form of insurance.
Samir Shahbaz: Mr. Zlochevsky, thank you very much for your time and comments.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.