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Russia's wheat export prospects dim after tax launched

Russia's wheat export tax, launched on Sunday, will further slow already reduced export supplies of the grain as it seeks to cool domestic prices due to the currency crisis, traders said. Russia's rouble fell 40 percent against the dollar last year and has continued to sink this year due to weak oil price and Western sanctions over Moscow's role in the Ukraine's crisis.

In theory, a weaker rouble should be good for Russian wheat exporters as their grain becomes cheaper in dollar-denominated global markets, where wheat is hovering around four-month lows. But price slump may mean Russia's government is unlikely to ease its informal export curbs imposed in December - including tougher phytosanitory controls on plant pests - after the export tax was launched on Sunday, traders said.

"The government does not want wheat to go out," a trader said. "The rouble at 70 makes it very interesting to export." Russia's wheat export tax, or a duty on wheat exports, amounts to 15 percent of the customs price plus 7.5 euros and will be no less than 35 euros per tonne until the end of 2014/15 marketing year on June 30.

The tax was only imposed on wheat and some traders can now shift to sell other cereals abroad. "With the export tax the profit margins are thin and there are still other measures that impede trade of wheat for export, so from February many exporters are switching to sales of corn (maize) and barley," another trader said.

For wheat, phytosanitory controls remain tough and exporters are not signing new deals, while trying to take volumes for previously agreed contracts. "Exporters are not basically planning (new) business for February," a trader said. "Any price calculations are useless now as farmers are not selling and waiting for clarity." Russia has exported 22.7 million tonnes of grains, including 17.9 million tonnes of wheat, since the start of this marketing year on July 1. In January Russia exported 1.7 million tonnes of grains, including 1.5 million tonnes of wheat, according to the Agriculture ministry.

Several vessels with wheat for Egypt, the world's largest wheat importer and second largest buyer from Russia have been stuck at Russian ports due to informal curbs. "There is no major improvement to the situation, what was not loaded by the end of January will now be subject to the export duty/tax," one of them said on Monday. Among other large importers of Russian wheat, Turkey is the top customer, while Iran is the third largest buyer.

Copyright Reuters, 2015


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