IKAR in Mass and Industry Media

Russia Sets New Wheat Tax To Limit Exports, Support Meat Farmers

Bloomberg

Russia introduced another tax on wheat exports in an effort to keep domestic grain prices down and support its bakeries and livestock industry.

Exporters will be charged at least 50 rubles a metric ton, with the levy rising if wheat prices gain above 11,100 rubles ($212), according to a decree on the cabinet’s website on Friday. The nation, the fourth-biggest shipper, on May 15 ended a previous tax that had been in place since February.

Russia has restricted grain sales to cope with soaring inflation and protect meat producers from rising animal-feed costs. The nation is seeking to expand local food production and replace products it banned from the U.S. and European Union in retaliation for sanctions over the Ukrainian conflict. The new tax may cut exports by as much as 29 percent to a three-year low, and hurt domestic farmers who would be forced to sell at a discount, the Russian Grain Union said this week.

“It’s a serious mistake,” Dmitry Rylko, director of Moscow-based Institute for Agricultural Market Studies, said of the incoming tax. It will curb domestic prices, spur farmers to reduce wheat plantings and cut outbound shipments, he said.

The tax will be 50 per cent of the customs value of wheat, minus 5,500 rubles, according to the decree. The charge will be fixed at 50 rubles a ton on wheat priced up to 11,100 rubles a ton, and more if prices are higher.

Next season’s crop was at $190 a ton on a free-on-board basis in the week to May 25, data from Moscow-based grains carrier ZAO Rusagrotrans show. At that price, a 50-ruble-a-ton charge would be imposed under the tax.

New Tax

Deputy Prime Minister Arkady Dvorkovich said the levy, which starts as the 2015-16 season gets under way, won’t hurt grain growers, according to a report from the Tass news agency on Friday.

Wheat exports may drop to as low as 15 million tons next season, Arkady Zlochevsky, president of the Russian Grain Union, said Wednesday. That would be the lowest since the 2012-13 season, when dry weather scorched crops, data from the U.S. Department of Agriculture show. Russia is expected to export 21 million tons of wheat this season, according to Zlochevsky.

02.06.15

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