Russian premier Vladimir Putin's decision to stop wheat exports from 15 August 2010 has raised market concerns over a possible stagflation.

US wheat futures went up by more than five per cent on Friday, bringing weekly gains to around 25 per cent, as a buying frenzy ensued once news of the Russian ban broke.

Wheat prices soared to a maximum daily limit of 60 cents reaching $7.86 a bushel on Chicago's exchange, an eight per cent increase. Corn, oats and rice futures also went up significantly.

Russia is reeling under its worst heat wave in over 130 years. Severe drought has resulted in a reduced grain forecast which has prompted the curb in wheat exports.

Further drought warnings have also been issued and could affect winter crops as well. In such a scenario, Russia would need to pull out of the export market for a period of two years.

Low-income countries such as Egypt and Pakistan will be the worst hit among importers.