In early September Russian Prime Minister Vladimir Putin extended Russia’s ban on wheat exports until the harvest of 2011 to ensure the country’s agricultural industry would bounce back from a severe drought and wildfires that destroyed 20 percent of the crop this year. In televised remarks, the Russian Prime Minister said that the ban will be lifted only after the 2011 harvest in the interest of securing stability and predictability of business for all players on the market.

Before the announcement of export suspension, officials in the Russian agricultural industry remained optimistic about the situation. Even though wildfires burned through Russia for almost 2 months during the summer, the Russian Grain Union estimated that the drought was not likely to undermine Russia’s position as one of the 5 biggest exporters of grain in the world, according to Alexander Korbut, the Vice President of the Russian Grain Union. The drought destroyed nearly 10 million of the 48 million hectares of crops, mainly grains. The Russian Grain Union initially calculated that grain exports could drop to 17 million tons this season from 21.5 million tons during the previous season. In 2009, Russia was the world’s third largest exporter of wheat.

Economists believe that another restraining factor for Russian exports has been the lack of incentives to compete on global markets. Grain prices have been rising faster in Russia than on world markets.