Russian wheat price may rise when tax removed

Moscow | Reuters — Russian wheat prices may rise in coming weeks when the government removes an export tax, set earlier this year to cool food inflation, SovEcon agriculture analysts said Thursday.

Russia will take a decision by mid-May on removing the tax ahead of schedule and will set up a new mechanism in case it needs to act quickly to regulate trade in the future, an official said this week.

“The short-term effect of setting the tax to zero, which may happen in the nearest few weeks, is a likely growth in wheat prices, first of all in southern export regions,” SovEcon said in a note.

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One of the options, which the government is considering for the new mechanism, is a floating tax, two industry sources told Reuters on Wednesday.

“If such a mechanism (a floating tax) is indeed introduced, it would mean higher risks for wheat exporters and lower income for farmers,” SovEcon said. The current tax is levied at 15 per cent of the customs price plus 7.50 euros, but not less than 35 euros (C$47) a tonne.

So far, Russian wheat prices have continued to slide this week on supplies from farmers freeing up storage before the new 2015-16 marketing season starts on July 1.

This week, domestic prices for third-class wheat were down 125 roubles compared with a week earlier at 9,125 roubles (C$214) per tonne in the European part of Russia on an ex-works basis, SovEcon added.

It quoted Black Sea forward prices for the new crop wheat, which southern regions usually start to harvest in late June, at C$236 per tonne.

According to the agriculture ministry, Russia has exported 27.7 million tonnes of grains, including 20 million tonnes of wheat, since the start of this season on July 1.

SovEcon also kept its 2015 grain crop forecast unchanged at 93 million tonnes, but added that while Russia’s spring grain sowing was still delayed, conditions for the crop had improved thanks to warm weather in late April.

In the domestic sunflower seed market, SovEcon said prices fell 125 roubles to 20,600 roubles per tonne, while FOB Black Sea prices for crude sunflower oil were up C$24, to $945-$957 per tonne.

Local trade activity in the next 10 days is likely to be low because Russia has public holidays on May 1, 4 and 11.

Reporting for Reuters by Polina Devitt in Moscow.

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