"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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In a letter to Russia’s Federal Service for Veterinary and Phytosanitary Surveillance (VPSS), the industry group said that, as of Dec. 7, all Canadian pork exports destined for Russia are being tested to ensure they are free of ractopamine.

Russia is Canada’s second-biggest pork export market in volume.

The tests are being conducted at one of three laboratories certified by the Canadian Food Inspection Agency (CFIA). The government agency’s export certificates now must be accompanied by lab tests negative for ractopamine, Jacques Pomerleau, executive director of Canada Pork International, told Reuters in an interview.

"Since the Russians are requiring those tests, it’s up to the companies to have the product tested and the results must be provided to CFIA so they can attach it to the certificates," he said. "We need to comply with the Russian requirement. Russia is a very big market for Canada."

Canada Pork sent the letter to VPSS to clarify the shippers’ position — that there is a strong consensus to comply with the requirement, he said.

The CFIA itself has not changed its own procedures and tests for meat exports to Russia, Pomerleau confirmed. Last week, Agriculture Minister Gerry Ritz said the government had made no change and had told Russia that Canada does not think its new requirement is based on science.

"Canadian officials, in contrast to Canadian business, have yet to express willingness to adhere to the requirements of Russia and the Customs Union to abandon the use of synthetic growth stimulators in the production of goods exported to Customs Union countries," the VPSS said in a statement.

U.S. trade and agriculture authorities have taken a stand against Russia’s sudden decision to require that meat imports be documented as free of ractopamine.

A U.S. trade official said the United States remains "very concerned that Russia has taken these actions, which appear to be inconsistent with its obligations as a member of the World Trade Organization.

"We continue to call on Russia to suspend these measures and restore market access for U.S. beef and pork products."

There has not been any noticeable reduction in shipments of Canadian pork to Russia since Dec. 7, and December is typically a slow period, Pomerleau said.

The Canadian pork industry is also working on new protocols to demonstrate that Canadian pork shipments to Russia were derived from pigs who were not raised with the drug, which is used to make meat leaner.

"No beef exports"

Canada has shipped virtually no beef to Russia since it imposed the new rule on ractopamine, said John Masswohl, director of government and international relations for the Canadian Cattlemen’s Association.

Masswohl said he’s aware of only two major Canadian processing facilities – both owned by Cargill Ltd – that are currently eligible to ship beef to Russia.

"Cargill, the way I understand it, has made a decision not to risk exporting to Russia as a result" of the ractopamine requirement, Masswohl said. "In essence, we have no beef exports to Russia."

Cargill could not be reached for comment.

Russia is a significant high-end market for Canadian steaks, but not one of Canada’s biggest beef customers in overall volume.

Ractopamine, 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.

— Rod Nickel and Melissa Akin write for Reuters from Winnipeg and Moscow respectively.

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A newly formed commission on food security is due to meet on Wednesday under the chairmanship of Deputy Prime Minister Arkady Dvorkovich, in charge of industry and commodity producers in the new government of Prime Minister Dmitry Medvedev.

"There will be a meeting on the grain market," Dvorkovich told Reuters on Tuesday. "I see no basis for limiting exports."

Russia banned exports in 2010 to restrain prices and ensure domestic supply in response to a catastrophic drought that destroyed a third of the crop.

The ban shook the trust of longtime consumers and Russia has since sought to assure markets that a repeat is unlikely.

But a spring drought in the key export regions of on the Black Sea slashed yields, and later spread to parts of the Volga River valley and Siberia, renewing questions about export restrictions. Market sources cited a Goldman Sachs report as saying they appeared possible this year.

"The state’s opportunities to regulate the domestic market through export limits look rather limited," Andrei Sizov Sr., chief executive of Russia’s SovEcon consultancy, said. "After joining the World Trade Organization, rapid imposition of export duties, especially ‘floating’ ones, is practically impossible, and a ban on exports is politically unacceptable."

Sizov slashed his harvest forecast by several million tonnes to 78.5-81.5 million tonnes, down from 94 million tonnes last year, and said Russia may export just 10 million tonnes of wheat this year as grain exports fall by half from last year’s record 28 million tonnes, which included over 21 million tonnes of wheat.

"At forecast production levels, with a reduction in carryover stocks, and an insignificant increase in domestic consumption, Russian grain exports in the 2012-13 agricultural year could fall by half to 13-14 million tonnes, including 10 million tonnes of wheat," Sizov said.

"These volumes would be achieved through a significant increase in external prices, which will support export, regardless of rising domestic prices."

Exports have been off to a slow start this year as Russian grain prices have shot up with world prices, and traders are waiting for prices to drop.

— Darya Korsunskaya and Melissa Akin are Reuters correspondents in Moscow.

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Russia’s government will determine on Thursday how much grain can be exported during this crop year before it considers imposing a protective duty to keep grain in the country, Deputy Prime Minister Viktor Zubkov told Reuters.

"The day after tomorrow I will hold a meeting. We will decide and I will give some signals," Zubkov said in response to a question about the level of export which could trigger the duty.

Traders and analysts said last week they expected Russia’s government, which has said Russia should export no more than 23-25 million tonnes of grain during this crop year, would consider imposing export duties from April, when exports are likely to hit that level.

Russia has been a bullish factor on world wheat markets in the last week, first because of speculation that the duty would be imposed to limit exports, then because of hard frosts which caused concern about Black Sea exporters’ crops.

Chicago wheat rose to a four-week peak on Tuesday, boosted by talk of Russian export restrictions. Industry watchers said on Tuesday, however, that Russia has more grain available for export than expected after a harvest of nearly 94 million tonnes which beat earlier forecasts, suggesting the government could allow more exports than it had indicated earlier.

SovEcon analysts, who had forecast an exportable surplus of 24.5 million tonnes, said on Tuesday, however, that it was larger than expected.

"Export is proceeding at a higher pace and export restrictions could enter force more quickly than expected in the autumn," SovEcon analysts wrote.

"At the same time, the exportable surplus of grain in 2011-12, by SovEcon’s estimate, could be increased by at least two million tonnes, which could extend the period of export activity without triggering any restrictions."

The head of a large industry lobby, the Grains Union, said Russia formally had an exportable surplus of as much as 33 million tonnes, but prices would be a limiting factor on exports.

"If no duty is introduced, I think we’ll call a halt at about 27-28 million tonnes," Zlochevsky told reporters on the sidelines of a conference held by the Institute for Agricultural Markets Research (IKAR).

"Lack of clarity"

Earlier in the day, Deputy Agriculture Minister Ilya Shestakov declined to comment on the government’s target. He said the final decision would depend on the export outlook for February, which would be clear by mid-month.

"We are constantly monitoring export volumes. The decision will be made in advance," Shestakov told Reuters. "There are quite a few precursors for introduction of a duty."

Shestakov said assumptions that the duty could be introduced from April were "groundless."

Zlochevsky said the government was discussing a levy from April onward, according to plans now under discussion by the Russian government.

The Grains Union had approached Prime Minister Vladimir Putin before the new year to ask that the government abandon consideration of the duty, he added.

Putin’s government raised the possibility of a duty as its preferred method of controlling exports before it lifted a ban on exports imposed to protect domestic supplies after a catastrophic drought in the summer of 2010.

"If no duty is introduced, I think we’ll call a halt at about 27-28 million tonnes," Zlochevsky told reporters at the conference, adding that domestic prices would become a limiting factor on exports.

Prices for Russian export wheat jumped as much as $6 per tonne (all figures US$) last week as traders confronted bare elevators in Russia’s southern export regions and hesitated to buy grain inland for export, fearing export duties.

"On one hand, this is forcing the hand of some exporters, who must buy grain to fulfil previously agreed contracts before possible export limitations come into effect. Grain deliveries from distant regions where it is in surplus… given the problems with rail freight, could be too late," SovEcon wrote.

"On the other hand, the lack of clarity on the possible date when export restrictions could be introduced is discouraging exporters from signing new contracts for April and later dates, which is facilitating a rise in world prices for that period."

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