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Drought halts Russia grain exports

Russia has banned grain exports after a severe drought destroyed 20% of its wheat crop.

The country is among the world's largest exporters and fears that it might cut exports have already helped to drive up wheat prices by nearly 70% since early June.

The ban goes into effect on August 15 and runs until December 31.

Prime Minister Vladimir Putin said the ban is needed to prevent a rise in domestic food prices, preserve the number of Russia's cattle and build up reserves.

The higher wheat price may mean that Americans and Europeans pay slightly more for bread. The bigger burden will fall on people in the Middle East, Africa and parts of Asia, analysts say.

Mr Putin said the ban - which in addition to wheat and wheat flour, covers barley, rye and corn - was necessary even though Russia has sufficient reserves.

It was imposed despite a claim two days earlier by a deputy agriculture minister, Alexander Belyayev, that Russia would continue to export grain. He said national reserves were sufficient to meet domestic demand and allow for exports.

Mr Putin said Russia would decide after the harvest whether to extend the ban into 2011.

Regardless of the ban, Russian farmers have little incentive to export - grain prices have been growing even faster in Russia than on world markets.

Most of the damage to Russia's wheat crop has been caused by the drought, one of the worst in decades as much of the country suffers through the hottest summer since record-keeping began 130 years ago. But wildfires raging through much of western Russia have spread into farmland and there are fears that more fields will be lost.

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