Russia Goes Against the Grain With Wheat Restrictions

(Bloomberg) --

Russia, one of the world’s top wheat shippers, was among the first nations that moved to guard domestic food supplies amid the coronavirus pandemic. The window closed swiftly on the sales abroad that it did allow.

A 7 million-ton quota the nation allotted for grain exports through June was filled over the weekend —  well before the quarter’s end. Traders rushed to get orders on the books for future shipments and some key importers have moved to bolster reserves. According to a Kommersant report on Tuesday, the Russian Bakers Union sent a letter to Minister of Agriculture Dmitry Patrushev asking for subsidies and tighter quotas on wheat exports.

Despite the supply restraints, wheat futures extended a recent slump because there appears to be plenty to go around for the coming months. About 3 million tons of Russia’s allocation is still left to move in the coming weeks, according to a local grain union, and Russia will only halt exports after final cargoes have sailed. Plus, buyers may start curbing purchases as they wait for cheaper crops following summer harvests and as oil’s plunge takes a toll on importers’ economies.

Russia’s move isn’t likely to affect consumers in the U.S. and European Union, which are both rival exporters. The world’s big wheat importers are in Southeast Asia, the Middle East and North Africa.

While there are still ample global food supplies, memories of past shortages have restarted the debate about the costs of food nationalism. Organizations like the United Nations have said the risk of social and political unrest are rising amid the pandemic and urged against measures that could harm food security and raise prices.

To help prevent shortages, about 50 countries pledged last week to ensure the food pipeline stays orderly and that officials use restraint with any trade restrictions. “Lessons from previous crises have taught us that export restrictions increase food insecurity for vulnerable populations,” the group’s statement said.  “The world’s poor, including agricultural workers, would bear the brunt of increased export restrictions.”

Russia wasn’t among the signers, despite its agreement a month ago with other Group of 20 economies to “spare no effort” to minimize disruptions to trade and global supply chains.

A few other “starve thy neighbor” policies are already beginning to ebb. Vietnam’s trade ministry recommended that the prime minister end trade restrictions on rice shipments from the start of next month, and Kazakhstan may end grain and flour export quotas in June.

Charting the Trade Turmoil

Slaughterhouse shutdowns are leaving the U.S. close to meat shortages as coronavirus infects meat-processing workers across the nation and the rest of the Americas. Almost a third of U.S. pork capacity is down, the first big poultry plants closed on Friday and experts are warning that domestic shortages may be just weeks away. 

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Bloomberg Analysis

• Worst-case scenario | The global recession looks to outstrip even the most pessimistic of early forecasts, according to Bloomberg Economics.
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• Use the AHOY function to track global commodities trade flows.
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