Wheat prices sharply up as Russia introduced new restrictions

Wheat prices sharply higher after Russia’s tax news

From Dec 28 to Jan 15, 12.5% wheat prices in deep-sea ports increased by $25 to $286/mt, in shallow ports climbed $13 to $254/mt. The market was supported by Russia’s authorities’ chaotic export regulation and higher global benchmarks. (And deep-sea offers are above $300 today!)

In December 2020, the Russian government imposed export taxes on oilseeds and 25 eur wheat tax, alongside the 15 Feb-30 Jun grain quota of 17.5 mmt, after President Putin expressed deep concern regarding rising food CPI.

Last week, on Friday, Russia announced that the wheat tax will be doubled to 50 eur from March 1. As per market sources, Russian officials were not satisfied with domestic market prices dynamics in December 2020.

Additionally, they were concerned that the current rally in the global market would fully offset tax impact on the domestic market. In addition to rising wheat tax, the decision was made to tax barley and corn exports at 10 eur and 25 eur respectively starting from March 15.

The government also said it could reinstall the “floating” wheat tax from July 1 as it wants to force farmers to sell their wheat in 2020/21 and to postpone sales until the new season. “There is no point in holding the grain and waiting,” Economy Minister Maxim Reshetnikov said in the statement.

The floating tax works as follows: the government sets a threshold export price in rubles, everything above is being taxed at 50%. I.e. if the threshold price is 16,000 rub/mt, the export price of $280 is converted into rubles 20,720 rub/mt (USDRUB = 74), the tax is 2,360 rub/mt (0.5X(20,720-16,000)).

Farmers are likely to lose the incentive to store wheat till 2021/22 and we could see more aggressive domestic sales and exports. As a result, Sovecon could up its Russia’s wheat export estimate from December estimate of 36.3 mmt.

Follow the Black Sea grain market

Get your free trial of The Sizov Report — an analytical service covering agricultural markets of Russia, Ukraine and Kazakhstan

Try for free

More Articles for You

Siberia saves new Russian wheat crop

Russian farmers have harvest 71 mmt of wheat in bunker weight and Siberian yields are great

Russian wheat prices push higher again supported by export tax

Last week, 12.5% wheat prices in deep-sea Russian ports rose $2 to $303/mt, the new seven years high. Russian wheat continues to lose its competitive edge but hardly predictable export tax doesn’t allow exporters to lower prices.

Russian wheat prices hit 7 years high

Prices for Russian wheat with 12.5% ​​protein at the end of last week have strengthened by $3 to $301/mt FOB deep-water ports. This is the highest price level since April 2014.

Russian wheat ruble prices lower, harvest pressure at last?

Last week, domestic wheat prices dropped in Russia by 1.5%, which was the fist decline after several weeks of rapid growth.

Russian wheat prices higher but buyers started to lower ruble bids

Last week, 12.5% wheat prices in Russian deep-sea ports rallied further, by $13 to $299/mt supported by firmer ruble prices. Earlier rally in the global benchmarks also helped. Closer to the end of the week many buyers started to lower bids hoping that the ruble market could reverse soon.

Black Sea wheat price rallied after WASDE

Russia’s domestic wheat market is rising fast, supported by demand from exporters and domestic buyers as well as worsening crop outlook. This could negatively affect wheat exports pace during the next few months from the top world wheat exporter.