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Russia to Decide on Extension of Wheat Export Tax for July 1

On February 1, in an effort to ease food inflation, Russia imposed a tax of 15% of the customs price plus $8, (but no less than $38.60 per ton) on wheat exports. The tax is due to expire on June 30 but wheat traders in the country are concerned that it will be extended into the new 2015/16 marketing year scheduled to begin July 1, causing disruption in trade.

Prime Minister, Dmitry Medvedev has requested that his ministers of agriculture, the economy and finance, work with industry unions to submit proposals and justification by mid-April for extending the tax beyond the June 30 deadline.

Inflation in Russia reached a 13-year high in February as the country’s economy reacted to a fall in global oil prices, and particularly to the crisis in Ukraine and the Western sanctions imposed upon the country for its role in the crisis’ escalation. However, since that time, inflation has leveled off and crop conditions in the south of the country look positive, leading Russia’s agriculture consultancy, SovEcon to forecast that the tax will be eliminated from July 1 onward.

Major grain traders in the country are delaying forward deals on new crop wheat because of the possibility that the tax may be extended, and Medvedev’s orders to his ministers came just days after the Russian farmer’s lobby and grain exporters requested that the tax be eliminated ahead of schedule. This week however, the ministry set its wheat prices high for its restocking program for the 2015/16 marketing year, giving additional indication that the government may not view it necessary to extend the tax, according to IKAR agricultural consultancy.

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