Russia lifts duty on wheat exports early

Tax was set to expire on June 30, but inflation has slowed and supplies have remained high

Russia has decided to lift its wheat export duty almost a month and a half ahead of schedule.

The tax of EUR35 (US$40) per ton originally was imposed from February 1 until June 30 to cool domestic prices and food inflation after the ruble fell last year. But Russia’s wheat prices have been falling as inflation has slowed and supplies have remained high.

The decision to lift the tax will allow Russia to export up to one million tons more of wheat by June 30, which will help avoid a grain glut domestically and keep prices above the cost of production, according to reports.

Analysts believe the move will put more pressure on global wheat prices, which have been trading at less than $200 per ton this year.

Tax impact on foreign sales

The tax affected foreign sales, as Russia’s wheat exports in January were 30 percent ahead of where they were one year prior. However, the figure had fallen in May to 17 percent. Overall production for this year’s harvest is expected to reach 100 million tons, down slightly from last year’s 105 million tons.

Analysts say the withdrawal of the wheat tax is meant to shore up domestic prices during harvest, but farmers have complained that they are losing money because of the tax. The government said it is working on a more flexible export duty program, where wheat sales are taxed only if domestic prices rise above RUB12,000 (US$243) per ton. When prices are below that level, the export tax would fall to EUR1 per ton; when they are above that level, the tax would range from 30 to 40 percent of the export price.