Russia mulls wheat export tax as shipments hit record
The Russian government is discussing the potential introduction of an export tax on wheat to tame raging domestic prices as...
The Russian government is discussing the potential introduction of an export tax on wheat to tame raging domestic prices as wheat shipments hit record highs.
Russian wheat exports now total 23.5 million mt since the start of the 2020/21 marketing year, as of December 8, according to data from the country’s state food watchdog.
That is the largest figure since at least 2014 when the watchdog began publishing data, and is 800,000 mt higher compared with the previous record of 22.7 million mt in the corresponding period of the 2018/19 marketing year.
Russian wheat exports have accelerated this marketing year as the country is set to receive its second-biggest grain crop in history of more than 131 million mt, while the supply of the key competitors – the EU and Ukraine – has dropped sharply.
Increased exports demand for Russian wheat has supported the country’s internal market prices.
In response to domestic consumers’ request to calm the market, the Russian agriculture ministry has pledged to introduce an export quota of 17.5 million mt for major grains like wheat, corn and barley for February 15-June 30 to tame food inflation.
But prices have continued to rise and the government on Thursday started discussing the implementation of an export tax on wheat shipments, which was last seen during the 2015/16 marketing year.
The move came after Russian President Vladimir Putin criticized rampant food inflation during a governmental meeting on Wednesday.
Eduard Zernin, head of the Union of Russian Grain Exporters, confirmed to Agricensus that the government is discussing with market participants the possible introduction of an export tax on wheat, but details such as the level and taxation mechanism are still to be finalized.
The government is expected to impose a RUB2000/mt ($27.32/mt) tax on wheat shipments for February 15-June 30 however, according to market rumours.
In response to that, cash FOB export prices for Russian wheat have dried up for later months, while prompter December and January loading positions are unchanged, both in the deepwater market and shallow water market.
That relfects participants waiting for clarity on the issue, while CPT levels have dropped by RUB200-700/mt ($3-$10/mt) on Friday in a move that is yet to stimulate any selling activity.
“Farmers do not yet quite understand why prices have fallen so sharply and some exporters do not show prices at all. The understanding that the market includes a duty in the price has not yet arrived,” a Russia-based broker said.
Food prices have been on the rise in Russia since the beginning of 2020, with the food price index rising 3.8% year-on-year between January and November, according to data from the Russian statistical office.
Cereals and pulses prices have increased the most, jumping 20.6% year-on-year, while bread prices increased 5.2%, pasta by 8% and sunflower oil prices by 7.4%.
On Thursday, the government increased the export tax for sunflower seeds and rapeseeds to 30% and no less than €165/mt, from the previous level of 6.5% and no less than €9.75/mt with the new level to be levied from January 9 to June 30, 2021.