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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.
- Export bans should be avoided - while they may be politically necessary in extreme circumstances, they are always unreliable economic management tools;
- Subsidies to the final producer of the food (like a bread or flour producer) are more likely to be effective than bans on export, if the aspiration is to keep domestic food prices low;
- Policies aimed at alleviating the difficulties faced by vulnerable groups need to target those groups. Export bans, even if they were to work as planned, are universal and so have very small impact on anyone in particular;
- Russia should try to balance its support for the meat industry with greater support for investment in grain as this would help both industries long-term.