Benchmark wheat futures rushed to a 23-month high on Thursday after Russia's Prime Minister Vladimir Putin announced a temporary ban on the export of grain and related farm products from the drought-wracked country, according to Reuters. With Russia at the mercy of its worst drought in over a century, Putin also pledged 10 billion roubles ($335 million) in subsidies and another 25 billion roubles in loans to the agricultural sector, adding that grain from the government intervention fund will be distributed to regions. A spokesman for Putin said the ban would come into force on August 15, fanning benchmark wheat prices in the United States which have risen almost 70 percent since late June. Wheat futures on the Chicago Board of Trade sprinted to be limit up on Thursday at a 23-month high of $7.85-3/4 a bushel. This is still a long way short of the $13.34-1/2 a bushel hit during the 2007/2008 food shortage price spike. The rapidly deteriorating crop outlook in the Black Sea region, worries about plantings for next year's crop and concern about the impact of Russia banning exports has fuelled the searing rally in global wheat markets. "An export stop by Russia means the cards are reshuffled in the international wheat market. It would open up huge new opportunities for west European and U.S. sales. The implications would be huge," a Europe-based trader said. Last year Russia exported 18.3 million tonnes of wheat, a total only exceeded by the United States and the European Union, according to International Grains Council figures. Fears about a repeat of the 2007/08 food crisis and inflation have been a major driver in the wheat rally, but the United Nations Food and Agriculture Organisation said on Wednesday that such concerns were not justified. The FAO said world stocks, especially those held by major exporters, were enough to cover expected production shortfalls after two consecutive years of record crops. "External factors, including the macroeconomic environment and developments in other food markets, which were major drivers behind the surge in international prices in 2007/08, are not posing a threat so far," the FAO said. Some market players agreed, taking on board the role of speculators in the current spike. "A (Chicago) market that gains $1 in four days is not a fundamental one," a trader said. "The pullback if it happens will be all the more severe. "It's a financial players' market, they'll take it where they want," he added. Russia introduced high grain export tariffs for several months in 2004 and 2008 to keep grain at home, and it sold grain from its stocks on the domestic market to keep prices down. Setting tariffs is normally a lengthy procedure which has to be agreed upon by various government ministers and then endorsed by Russia's partners in the newly created customs union -- Belarus and Kazakhstan.
