Russia Considers New Wheat Export Tax to Protect Livestock Producers

Only ten days after ending its last existing wheat export tariff, Russia is considering reinstating new curbs on wheat shipments claiming it must protect its livestock producers from rising feed costs.

Upon the beginning of the 2015/16 marketing year on July 1, if approved by the Cabinet, Russia would re-impose a tax of at least one ruble per ton, but if prices exceed US$220 per ton, it would trigger higher rates.

The proposed 11,000-ruble threshold is “a very low level to trigger a tax,” Arkady Zlochevsky, president of the Moscow-based Russian Grain Union, told Bloomberg.

Prices for next season’s crop increased 2.7% to US$190 per ton in the week to May 18, according to data from grains carrier ZAO Rusagrotrans. The country’s Agriculture Minister, Alexander Tkachev stated that wheat prices need to be strictly limited in order to protect the Russian animal-breeding sector.

The country’s previous wheat export tariff imposed on February 1 of 15% plus US$8.23 per ton, was enacted in order to control soaring food prices after the country’s economy faltered last year as a result of plunging oil prices, international sanctions in response to Russia’s actions in Ukraine, and the ruble plunging. Although planned to continue to July 1, it was rescinded on May 15 as monthly exports were cut by more than half and prices stabilized, however on that same day it was announced that tariffs may be reintroduced should domestic prices begin to climb.

If the ruble remains at its current value in regard to the U.S. dollar, the new tax may be set quite low, however, if the ruble slides, wheat exporters will be faced with the fallout.