Faced with the rise in the value of food, Russia will impose a tax on the export of wheat

Faced with the rise in the value of food, Russia will impose a tax on the export of wheat

The measure could reduce the volume of Russian wheat exports


december 14, 2020 • 19:01

Russia, the world’s main wheat exporter, made official today that foreign sales of the cereal will have a tax of 25 euros per ton (just over 30 dollars) between February 15 and June 30, when the 2020 business cycle closes / 2021 and the 2021/2022 harvest enters. This was reported by the Russian Minister of Economy, Maxim Reshetnikov, who put as the basis of the measure the need to “stabilize domestic food prices.”

The Russian government’s decision came after President Vladimir Putin’s criticism last week of members of the wheat, sugar and sunflower production chains for rising domestic costs of bread, flour, sugar and oil. sunflower.

Last Thursday, Russia’s Prime Minister Mikhail Mishustin had anticipated that the government would take action in the face of rising food prices and had warned producers, heads of retail chains and exporters not to “take advantage from the people”.

The new wheat export tax will be added to a foreign cereal sales quota of 17.50 million tons between next February 15 and June 30, where, although the largest volume is represented by wheat, corn, barley and rye are also included.

The news now confirmed ceased to be the rumor that during the past week allowed increases of more than 7 percent for wheat prices in Chicago. At the same time, the confirmation of the transcendent with which the market speculated gave rise today to drops in the US market, which revalidated the always current maxim of the futures markets: “Buy with the rumor; sell with the news.”

Indeed, the March position of wheat on the Chicago and Kansas Stock Exchanges fell today by 2.9 and 3.3%, going from 225.79 to 219.18 and from 213.57 to 206.59 dollars per ton, respectively.

According to Andrey Sizov, director of the Russian consultancy SovEcon, it is probable that the tax on wheat exports will reduce external sales due to “greater use of the cereal in the domestic market and, probably, to a greater passage of grain for the campaign 2021/2022, as some producers may choose to postpone their sales. ”

In an analysis of the news, the specialist calculated that from the 40.80 million tons that SovEcon estimated as the exportable volume of Russian wheat 2020/2021 (it is estimated that 23.50 million have already been shipped), the tax will make them dispatch “between 37.80 and 38.80 million tons”. In addition, the official measure would generate an increase of between 2 and 4 percent in the FOB prices of Russian wheat shipped between December and January, which would affect the competitiveness of Russia’s grain in global trade.

Last Thursday, in its monthly report, the United States Department of Agriculture raised its forecast for the volume of Russian wheat exports 2020/2021 from 39.50 to 40 million tons, after increasing from 83.50 to 84 million tons your estimate on the harvest.

Sizov added that the burden of the new tax will be absorbed mainly by grain producers and estimated that the wheat market would fall by around 10 percent in the next 1-2 months.

Last week, SovEcon lowered its estimate for Russia’s wheat harvest in the 2021/2022 cycle from 81 to 76.80 million tonnes, due to complications in planting winter varieties. Thus, production would be well below the 85.30 million tons calculated by the firm as the production volume for the 2020/2021 campaign.

In addition to wheat, according to Reuters, Russian sugar and sunflower oil producers agreed to price reductions for their products with retail chains. However, if that measure does not work, the government has warned that it could also impose a tax on the export of sunflower oil and reduce import duties for sugar cane.

Juan Manuel Niveyro

Movil: +54 9 3624 725988 (WhatsApp)

Skype: niveyro1

Barranqueras – Argentina