"No," said Dvorkovich when asked by Reuters whether he was prepared to support such a proposal. He did not elaborate.

Dvorkovich, a free trade advocate who took responsibility for the agricultural sector in government changes last year, is seen by the market as the deciding voice on the duty issue.

The government has held preliminary talks on a possible decision to remove the five per cent import duty to help ensure adequate supplies after a drought and heavy export sales, an agriculture ministry spokesman said on Monday.

Moscow has surprised markets by keeping Russia’s export channel open despite last year’s poor crop. That was in contrast to its imposition of a one-year export ban in 2010 that, officials now concede, stoked inflation.

This season the decision to let exports flow has meant that Russia could face a domestic shortfall of grain, as the country has already shipped more than its nominal exportable surplus.

Analysts and industry leaders say Russia could require 1.5-2.5 million tonnes of grain imports to close the gap but are still debating whether Russia’s domestic prices have risen high enough to allow profitable imports.

Russia has already exported 13.7 million tonnes of grain in the current 2012-13 crop season which started on July 1.

Last year’s grain crop fell to 70.7 million tonnes from 94 million tonnes the previous season, while the wheat crop actually fell short of the extremely poor result recorded in the 2010, a year of searing drought in Russia.

Elimination of the duty would make it profitable to import grain into Russia and cool domestic prices, which have continued to rise in the new year despite government efforts to mitigate gains by intervening on regional markets with sales of state stocks.

Intervention sales began late last year in Siberia, whose producers were hard hit by the drought.

The government is launching intervention sales in European Russia early in the new calendar year, when inflation tends to accelerate due to annual tariff increases and rising food prices.

SovEcon consultancy said prices on Russia’s grain market continued to gain steadily when trade resumed after Russia’s extended New Year and Orthodox Christmas holidays, gaining 125 roubles per tonne to stand at 11450 roubles (US$380) per tonnne ex-works in European Russia.

By comparison, March milling wheat futures stood at 252.25 euros (US$340) per tonne. Some analysts say that physical market prices suggest French wheat could be imported to St. Petersburg more profitably than supplies from Russia’s central black soil region.

The head of Russia’s Grain Union, Arkady Zlochevsky, has said the country, which normally imports small volumes of grain, such as high-quality milling wheat for pasta, has said the market is overheated and sizeable imports are not yet required.

The agriculture ministry spokesman said on Monday a decision was not imminent and would be guided by the results of the intervention tenders.

While it would help the government fight inflation by cooling wholesale grain markets, it could also cause conflict with neighbouring Kazakhstan, a fellow wheat exporting country which maintains a common trade policy with Russia and Belarus under a three-country customs union.

If the Russian government were to lift the duty, the process of agreeing the change with the customs union could take several months.

— Reporting for Reuters by Lidia Kelly, writing by Douglas Busvine and Melissa Akin.

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The move, imposed a day after the U.S. Senate approved a bill to expand trade between Washington and Moscow that also sought to punish Russian human rights violators, could jeopardize North American meat beef and pork suppliers.

It would potentially make the United States, which exports more than $500 million a year worth of beef and pork to Russia, significantly less competitive, giving advantage to Chinese and European Union meat producers, where ractopamine is banned.

The U.S. Meat Export Federation said the U.S. Department of Agriculture had no testing and certification program in place for ractopamine.

Canada started testing on Friday for the feed additive ractopamine in pork and beef to be shipped to Russia, in order to comply with a new Russian requirement, a top Canadian pork industry official told Reuters.

The Canadian Food Inspection Agency has provided meat processors with testing guidelines and is responsible for signing certificates to make sure the products meet Russian standards, according to Jacques Pomerleau, executive director of Canada Pork International.

However, Canada’s federal Agriculture Minister Gerry Ritz said in an email to Reuters Friday that Ottawa has asked Russia to delay implementation of the new requirement "to allow for a thorough and science-based discussion between Canadian and Russian officials."

Russia’s plant and health regulator, Rosselkhoznadzor, said that as of Friday it would allow for an unidentified transition period, during which in the absence of a needed certification, Russia will test each shipment itself.

"During this period the veterinary service of the suppliers have to create a system of laboratory testing of products certifying the absence of ractopamine," the regulator said in a statement posted late Friday on its website.

Rosselkhoznadzor did not specify what would happen to meat shipments already on their way, but the statement suggests the meat will be tested once it arrives in Russia.

USMEF, a non-profit trade association, said more than 210 shipping containers of U.S. pork and beef valued at about US$20 million were on their way to Russia.

Denial of retaliation

Analysts said the Russian move was linked to the U.S. Senate’s passage of the "Magnitsky Act" as part of a broad trade bill, which drew an angry response from Russia where officials called it "absurd."

Rosselkhoznadzor said Saturday it had warned over a year ago about the "inadmissibility" of meat with ractopamine to Russia and it had sent advanced legal notices to veterinary officials in the U.S., Canada, Brazil and Mexico.

"Rosselkhoznadzor was surprised to hear that some analysts linked Russia’s introduction of stricter control over the presence of the beta-adrenoceptor agonist ractopamine in imported meat with the passage by the U.S. Senate on Dec. 6 of the so-called ‘Magnitsky Act’," it said in a statement.

Gennady Onishchenko, Russia’s chief health inspector and head of the state consumer protection agency Rospotrebnadzor, denied the requirement of testing and certifying meat imports was retaliatory.

"In Russia, (ractopamine) is not included in the register of products approved for use," Onishchenko told the news agency Interfax on Saturday.

"We can only regret that American Federation analysts on meat exports lacked even a tiny bit of imagination to classify the 27 countries of the European Union, China and all other 167 countries that have banned the use of this product as opponents of the ‘Magnitsky Act’ adopted by the U.S. Senate."

Ractopamine is used as a feed additive to make meat leaner, but countries such as China have banned its use despite scientific evidence that it is safe. The United Nations has agreed on acceptable levels of the drug.

The drug, approved for use in Canada since 2006, is sold to Canadian users by U.S. animal health giant Elanco, under the name Paylean 20 premix for hogs and heavy tom turkeys, and as Optaflexx 100 premix for finishing beef cattle.

— Lidia Kelly is a correspondent for Reuters in Moscow. Includes files from Reuters and AGCanada.com Network staff.

Related story:
Codex standard near for Paylean, Optiflexx premixes, July 6, 2012

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