Agro Perspectiva

UK. Putin puts 15p on the price of loaf

10.08.2010 10:53 "Agro Perspectiva" (Kyiv) — Consumers face paying more for bread, pasta and hundreds of processed foods after Russia yesterday banned the export of wheat. City speculators immediately drove up international wheat prices, which will mean hard-pressed British families paying more for some foods in the next few months. Analysts said a loaf of bread could rise by as much as 15p. The price of grain used as animal feed is also likely to jump, making fresh meat more expensive. Wheat prices have risen some 70 per cent since late June and there is a risk they will surge again. It is feared that the ban introduced by Russia’s prime minister Vladimir Putin will trigger an international food war. One European wheat trader described the implications as ‘huge’. The ban will run from August 15 until the end of the year but could be extended. Mr Putin said the move was necessary to protect his country’s population against wheat shortages following a severe drought which has ravaged crops. However, the ban will have serious consequences for families in Britain and across the world. Russia is the world’s third largest exporter of grain, exporting 18.3million tonnes of wheat last year. But much of the country has suffered the hottest and driest summer in at least 130 years and the drought will cut production by 20 per cent. Wildfires raging through much of western Russia have also destroyed farmland. The shortage linked tothe drought had already brought predictions of food price rises before Christmas. The ban on exports will drive prices even higher. Martin Deboo, consumer goods analyst at investment bank Investec, said the rise in wheat prices could put up the cost of a loaf of bread by as much as 15p. ‘Our sense in the bread industry is that the processors aren’t holding too much wheat and flour,’ he said. ‘I think at current wheat prices you’re probably talking about something of the order of 10–15p going on to a loaf of bread — roughly a 10–15 per cent price increase.’ Earlier this week Premier Foods, which makes Hovis, said it would pass rising prices on to retailers. Russia’s export ban is evidence of the sort of protectionism typical of a Soviet state, rather than a nation keen to trade on an equal footing with the rest of the world. As such, it threatens a major breakdown in relations with countries in the West where such export bans would be unthinkable. Russia has a number of important supply contracts with food giants overseas which may be broken. But Mr Putin said the ban would prevent a rise in domestic food prices and ensure there is enough feed for Russia’s beef and dairy herds. Commodity traders reacted to the news by pushing up the price of wheat to a 23 month high. On the Euronext commodities exchange it rose by almost 12 per cent yesterday. Despite this, the price is still significantly below the spike seen during the 2007–08 panic over global food shortages. Moscow introduced export restrictions at the time, triggering a wave of panic buying from importers in North Africa and the Middle East. The UN’s Food & Agriculture Organisation has played down concerns of food shortages. It says world reserves are relatively strong following good crops in