Russia should limit grain exports via offshore firms, ag minister says

Moscow | Reuters –– Russia should limit grain exports through companies registered offshore, the country’s agriculture minister told TASS news agency, suggesting a possible way the government could curb exports as it has sworn off an embargo.

Russia is exporting grains at a record pace this year as a slump in the rouble makes them cheaper in foreign markets. The rapid pace of sales is triggering higher domestic prices.

The agriculture ministry has said it will consider all options to restrain exports except an embargo, which Russia used in 2010 when its crop was hit by drought.

“The only thing which we should look at is limiting of grain exports which go through shell offshore firms,” Agriculture Minister Nikolai Fyodorov said.

The Veterinary and Phytosanitary Surveillance Service (VPSS) has proposed to stop giving “third-country” phytosanitary certificates to exporters, Fyodorov told TASS in an interview published on Monday.

“We came to the conclusion that it is necessary to restore order here,” he said, adding that he did not see the need for an immediate decision.

The minister did not elaborate on what he meant by offshore firms or how much grain is being sold through them, while VPSS was not available for comment.

Many foreign traders, who have firms in Moscow, sell grain to key customers in North Africa and the Middle East through their main offices in Switzerland.

Russia can export 30 million tonnes of grains this 2014-15 marketing year, which started on July 1, without hitting domestic supplies, the minister said. So far the country has exported 19 million tonnes of grains, including 15 million tonnes of wheat.

Earlier, officials said Russia may consider imposing a floating tariff as a measure of last resort in 2015, while VPSS may tighten export rules.

The risk of future export limits has prompted some traders to cut prices to try to speed up sales: Russia’s Black Sea prices for wheat with 12.5 per cent protein content fell $5.50, to $258.50 per tonne, on a free-on-board (FOB) basis last week compared with a week earlier, SovEcon agriculture consultancy said Monday.

Russian state banks should also offer loans to cattle breeders and flour and bread producers so they can buy grain, Fyodorov said. He did not provide details.

Russia’s largest state banks have been hit by Western sanctions over the Kremlin’s role in the Ukraine crisis, which limited their access to foreign finance.

— Reporting for Reuters by Polina Devitt in Moscow.