File photo: Reuters

Russia's agriculture minister on Friday ruled out a ban on grain exports from the country, fears of which have helped to drive global prices higher following drought in US and Black Sea grain belts.

The minister, Nikolai Fyodorov, said Russia might use sales in some of its regions from state intervention stocks of grain - “pinpoint interventions” - to contain domestic food price increases due to expectations of a weaker Russian harvest.

“All instruments are on the table, except for an embargo, (which) could do more harm than good,” Fyodorov told Reuters after Prime Minister Dmitry Medvedev held talks with farm officials in the southern city of Rostov-on-Don.

“Pinpoint interventions are being considered where the situation is unacceptable for Russia,” Fyodorov said.

US wheat rose for a third straight session on Friday, boosted by growing expectations of likely restrictions to exports from the Black Sea region along with continued signs of renewed demand following a recent setback in prices.

From April to June Russia sold about 2 million tonnes of grain in state interventions. The country still has about 5 million tonnes in intervention stocks, which can be used to cool prices in key regions for domestic supply, like Siberia and Urals.

Medvedev downgraded Russia's harvest forecast in late July to 75 million-80 million tonnes, of which wheat was expected to account for 45 million tonnes, according to Agriculture Ministry calculations.

Fyodorov said on Friday he still saw Russia's 2012 grain harvest forecast at 75-80 million tonnes. “It depends on the weather. It could change,” he said.

Any effort by Russia to restrict grain exports is likely to provoke a similar move by neighbouring Ukraine, leaving markets lacking supply from two major Black Sea producers at a time when dry weather has slashed grain supply from India to Indiana.

With a harvest of 75 million-80 million tonnes, Russia could afford to export 10 million-12 million tonnes of grain, the government has said.

Some traders interpreted that declaration as an informal cap on exports and have rushed to export while the gates are open.

Russia's exportable grain surplus of 10 million-12 million tonnes could run out by November, according to traders and analysts.

But Fyodorov said on Friday that this figure was a minimum total, which might grow.

Russia could ultimately export as much as 16-17 million tonnes in the current 2012/13 crop year, the head of Russia's Grain Union Arkady Zlochevsky said in early August. - Reuters