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The Impact of Russia's 2010 Grain Export Ban

The Impact of Russia's 2010 Grain Export Ban

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Published by Oxfam
A key factor in global food price volatility is the way that states react to disruptions in supply. There is a strong inclination for exporters to impose export bans in reaction to potential food price increases in their own country. This reaction, however, is a poor strategy for managing food prices at home and has a range of unintended consequences for the domestic and international economy. This report looks at the short- and long-term impact of the grain export ban issued by the Russian government during 2010-11. In the summer of 2010 Russia experienced a heat wave that included the highest temperatures recorded in 130 years. As news of this disaster, and the resulting drop in Russia’s grain crop became known, international grain prices increased dramatically. In response to this increase, and in an effort to protect local consumers and local meat producers, the Russian government instituted a grain export ban that pushed grain prices higher in the international markets. As the ban is set to end on 1 July 2011, this paper considers it effectiveness, both in the short- and long-term. It shows that the ban did not bring food prices down in Russia, that it increased the price of grain internationally, and helped create an environment where price spikes and general instability are far more likely in the future. The report concludes with recommendations for alternative policies to increase food security in the future.
A key factor in global food price volatility is the way that states react to disruptions in supply. There is a strong inclination for exporters to impose export bans in reaction to potential food price increases in their own country. This reaction, however, is a poor strategy for managing food prices at home and has a range of unintended consequences for the domestic and international economy. This report looks at the short- and long-term impact of the grain export ban issued by the Russian government during 2010-11. In the summer of 2010 Russia experienced a heat wave that included the highest temperatures recorded in 130 years. As news of this disaster, and the resulting drop in Russia’s grain crop became known, international grain prices increased dramatically. In response to this increase, and in an effort to protect local consumers and local meat producers, the Russian government instituted a grain export ban that pushed grain prices higher in the international markets. As the ban is set to end on 1 July 2011, this paper considers it effectiveness, both in the short- and long-term. It shows that the ban did not bring food prices down in Russia, that it increased the price of grain internationally, and helped create an environment where price spikes and general instability are far more likely in the future. The report concludes with recommendations for alternative policies to increase food security in the future.

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Published by: Oxfam on Aug 18, 2011
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Oxfam Research Reports
The Impact of Russia’s2010 Grain Export Ban
George Welton
GeoWel Research
28 June 2011
This report looks at the short- and long-term impact of the grain export ban issued by the Russian government during 2010-11. It shows that the ban did not bring food prices down in Russia, that it increased the price of grain internationally, and helped create an enviroment where price spikes and general instability are far more likely in the future. The report concludes with recommendations for alternative policies to increase food security in the future.
www.oxfam.org/grow
 
 
The Impact of Russia’s 2010 Grain Export Ban 
, Oxfam Research Report, June 2011
3
EXECUTIVE SUMMARY
One of the key factors in global food price volatility is the way that states react todisruptions in supply. There is a strong inclination for exporters to impose export bans inreaction to potential food price increases in their own country. This reaction, however, is apoor strategy for managing food prices at home and has a range of unintendedconsequences for the domestic and international economy. In general, export bansexacerbate problems created by interruptions in food production and may damageincentives to increase production at home long-term.This research project looks at how these issues played out in the case of the Russiangrain export ban that was imposed in August 2010. In the summer of 2010 Russiaexperienced a heat wave that included the highest temperatures recorded in 130 years.As news of this disaster, and the resulting drop in Russia’s grain crop became known,international grain prices increased dramatically. In response to this increase, and in aneffort to protect local consumers and local meat producers, the Russian governmentinstituted a grain export ban that pushed grain prices higher in the international markets.The export ban is set to end on 1 July 2011. Now, therefore, seems a good time to reflecton its effectiveness. The report looks at the short-term and long-term impact of the ban.In the short-term, it focuses on the impact of the ban on food prices inside Russia andconsequently looks to see if the ban helped vulnerable Russian families. It also looks atthe short-term impact of the policy on the countries that buy Russian grain. In the long-term, it looks at the impact of the ban on global food price instability and on investment inthe Russian agricultural sector.
Main findings
Short-term domestic impact 
1. The ban did not bring down food prices inside Russia. Food prices generallycontinued to rise after the ban was imposed. Flour prices went up by 18 per cent fromJuly to December and bread went up by ten per cent.2. The impact of this price rise clearly hit Russia’s poorest hardest. The average price ofthe official subsistence basket of food rose even more than bread prices. In most ofRussia’s regions, particularly those directly affected by the drought, the subsistencebasket went up by 20-30 per cent between July 2010 and March 2011.3. As the cost of the subsistence basket provides a bench-mark for poverty in Russia,and as incomes have remained flat during this period, we can say that poverty willalmost certainly have gone up as a result.4. Since poverty is usually most concentrated in young people, they were probably thehardest hit. Women were also probably worse hit than men. According to officialstatistics, this gendered variation was small, but it may be worse when one takes intoaccount the greater role played by Russian women in providing food for their families.
Short-term impact internationally 
1. The ban did increase prices outside Russia. In countries that imported Russian grain,the most immediate impact of the import ban was to require countries to pay the newand higher international rates for grain that was contracted at lower rates.2. The export ban set prices higher still across the world. The immediate impact of theban was certainly a further rise in prices, as we saw in the reaction of commoditymarkets immediately following the announcement of the ban. This impact was felt byeveryone and not just Russia’s customers.3. Inside importing countries, the negative impact of the rise in prices depended on theway governments responded.

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