Banned Russian wheat exports hurt Africa

Wheat prices have spiked after a recent decision by Russia to ban grain exports for the remainder of the year due to a severe drought and wildfires having destroyed 20 percent of its crop.

The ban, announced by Prime Minister Vladimir Putin announced the ban at a Cabinet meeting on Thursday last week, have translated into higher prices for bread, cereal, and other foods.

The higher prices are expected despite the fact wheat harvest in the rest of the world are projected to be very strong.  Experts say the United States, Argentina and Australia will gain the most from the spike in wheat prices, because Canada and the European Union are not expected to have abundant harvests this year.

“Russia is the fourth largest exporter of wheat around the world in the 2009 crop,” Chris Hurt, a professor of agricultural economics at Purdue University, told NPR.

Hurt said the world’s poorest nations will be hit the hardest by the price increase.

“The ones are really going to be affected: Egypt, Algeria, Nigeria, Morocco and Iraq, so really some of the neighboring countries in Africa and on into Iran,” Hurt explained.

“The other thing that’s really difficult for these countries is they have low incomes, generally 5 to 15 percent of incomes of people here in the United States,” he said. “So when a basic food item like wheat goes up dramatically in price, it really affects their ability to pay for that.”

The World Bank on Monday urged countries to refrain from imposing policies that could trigger a new global food price crisis as drought-hit Russia said it could extend a grain export ban into next year.

World Bank Managing Director Ngozi Okonjo-Iweala told Reuters the sharp spike in grain prices since last week did not amount to a crisis yet, but emphasized increased food price volatility would hurt poorer countries.

She said the poverty-fighting institution would activate a food fund when the World Bank board, currently in recess, reconvened in early September in case the situation worsened.

Okonjo-Iweala said the World Bank was conducting a survey of vulnerable countries amid reports that exporters had cancelled wheat contracts to Bangladesh and were reviewing contracted wheat supplies to Egypt, the world’s largest wheat importer.

“Although you can understand how governments would want to … implement certain polices they think are good domestically, those policies are not always the best, like export restrictions and bans, have a strong impact on the market and cause hoarding,” she added.

Okonjo-Iweala said she hoped countries where grain production was good, such as the the United States, would make up for the decline in output in Russia.

She said global food stocks were better than in 2008, which saw food prices rise to record levels, triggering food shortages and related social unrest in poorer countries.

She said by activating the World Bank food fund, the institution would be ready to quickly disburse funding to countries if the situation warranted it. The fund was created during the 2008 price crisis to help developing countries facing food shortages and to help them increase production.

Okonjo-Iweala said there was about about $800 million in the fund to help developing countries. The fund disbursed roughly $1.2 billion during the 2008 crisis, while the World Bank also increased agricultural lending in its programs to boost food production.

“We are worried about the impact of continued volatility,” she added. “Countries have not called out yet. We are doing a quick survey ourselves to see which are the most vulnerable and whether their contracts are being impacted.”

She said a recent World Bank study of 26 developing countries showed significant increase in food price volatility over the past year.

Okonjo-Iweala said the Bank had been in contact with food aid groups working among communities in poor countries to gauge the situation.

Here is a video report on the Egypt, the world’s largest wheat importer.

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