MOSCOW, RUSSIA — Russian Prime Minister Vladimir Putin on Saturday, May 28, announced Russia would allow its ban on grain exports to expire on July 1. The announcement was anticipated but was made earlier than expected. European wheat futures prices in the first day of trading after the Russian announcement dropped 5%. When wheat futures trading resumed in the U.S. after Memorial Day, wheat futures prices posted wide declines, bringing to a halt a two-week rally that pulled Minneapolis, Minnesota, U.S. wheat futures prices well above $10 a bushel.

Russia imposed its ban on grain exports in August 2010 after drought, said by some analysts to be the nation’s worst in a century, ravaged its crops. The Russian export ban helped ignite a run-up in world wheat and food prices during the past several months with the result that wheat futures prices in the U.S. currently are trading at levels around twice as high as those that prevailed before the ban took effect.

Almost immediately after Prime Minister Putin announced the ban’s lifting, Russian wheat exporters offered wheat in connection with a Lebanese tender for 25,000 tonnes of optional-origin milling wheat for delivery by July 5. Ukrainian offers were lower, though, and that nation’s exporters were thought to have captured the business. Ukraine itself maintained strict quotas on exports during the past several months, but Ukrainian President Viktor Yanukovych on May 24 indicated quotas would be lifted because of the forecast rebound in Ukrainian grain production.

The U.S. Department of Agriculture in its May world wheat supply-and-demand forecasts, which assumed a lifting of the Russian grain export ban, projected Russian wheat exports in 2011-12 at 10 million tonnes, up from 4 million tonnes during 2010-11 but well below the record outgo of 18.6 million tonnes in 2009-10.

Before the grain export ban, Russia was Egypt’s largest supplier of wheat, and Egypt was Russia’s largest customer. Egypt’s General Authority for Supply Commodities (GASC), the nation’s principal grain importer, said it welcomed Russia’s return to the wheat market but added it would deal cautiously with Russia until it proved it was a reliable supplier. Last year, Egypt was forced to replace more than 500,000 tonnes it bought from Russian exporters who were not able to ship the supply when the ban took effect.