Russia seen removing wheat tax in July if inflation slows

Moscow | Reuters — Russia, one of the world’s leading wheat exporters, will probably not extend a tax on wheat exports, imposed until June 30, if optimism over lower inflation and a large crop persists among officials, SovEcon consultancy said.

Russia’s economy has been hit hard by low global oil prices and Western sanctions due to Moscow’s role in the Ukraine crisis. The rouble has plunged and inflation reached a 13-year high in February.

To try to cool food inflation, the government curbed wheat exports with informal limits imposed by its food safety watchdog in December and the tax on wheat exports from Feb. 1.

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“One should take into account the pace of inflation,” Andrey Sizov, the head of SovEcon, one of Moscow’s leading agriculture consultancies, told a conference on Thursday. “It’s not such a good reason as it was when the decision on the tax was made.”

Inflation has not been rising in recent weeks, increasing hopes among officials that it had peaked.

“In any case, the final decision will be made in June, when the situation with winter grains and spring grains is clear,” Sizov said. “But the probability that it (the tax) will be cancelled due to slowing inflation is higher.”

This view is also supported by the agriculture ministry’s optimism over the 2015 grains crop, Sizov added.

The ministry expects Russia to harvest a crop of up to 100 million tonnes of grain, only five million tonnes less than a near-record harvest in 2014.

However, the flow of Russia’s wheat exports will also depend on whether the food safety watchdog removes its limits which are still affecting trade alongside the tax, SovEcon said.

The tax is set at 15 per cent of the customs price plus 7.50 euros, but no less than 35 euros (C$48) a tonne.

SovEcon currently expects a 2015 grain crop at 93 million tonnes, it told the conference. Its estimate has been raised by nine million tonnes from a previous forecast made in late 2014 as winter grains were doing better.

The wheat crop is likely to come in a range of 51 million to 56 million tonnes, down from 60 million in 2014, Sizov added.

The consultancy did not provide an estimate for grain exports in the 2015/16 marketing year, which starts on July 1.

Reporting for Reuters by Polina Devitt in Moscow; additional reporting for Reuters by Michael Hogan, Jason Bush and Lidia Kelly.

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