High wheat prices could force Russian gov to raise export tax: traders

Russian grain traders are expecting the government to raise export duties further in an attempt to slow the flow of wheat...

Russian grain traders are expecting the government to raise export duties further in an attempt to slow the flow of wheat from the country, with rising prices on the international market having so far negated the impact of existing measures and failed to reduce domestic food costs.

Offers for Russian 12.5% milling wheat had risen to as much as $278-$280/mt FOB NTT for January-first half of February loading on Monday, almost $25/mt higher than a month ago when the tax was first announced.

With the cost of that tax now included in the export value, and with Russian wheat still among the cheapest origins on the planet, several grain traders told Agricensus Monday that the government is struggling to meet its aim of lowering domestic wheat prices.

As a result, traders are now discussing whether the government may seek further increases to the export duty.

“The export duty was introduced in order to stabilize domestic grain prices... The planned €25/mt tax is already almost completely absorbed by the export market, so the government has no choice but to consider raising the duty to a level that can have a significant impact on the domestic market,” Eduard Zernin, Chairman of industry lobby group Rusgrain Union told Agricensus.

Trade sources speculated the tax could double to as much as €50/mt.

Agricensus contacted the agriculture ministry for comment but had received none at the time of press.

Duty

Russia announced last month a €25/mt export tax and a 17.5 million mt quota to run from February 15-June 30 in an attempt to limit inflation in domestic prices.

Exporters cut their bids in the inland market in an attempt to have farmers shoulder the burden of the duty, although farmers were reluctant to sell at discounted prices.

Traders have since started to lift bids again to cover short positions, with some companies bidding on Monday at levels similar to those seen prior to the export tax and quota were announced.

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