Russia: Prime Minister asks for proposals on possible extension of wheat export tax

Russian Prime Minister Dmitry Medvedev has asked his ministers to submit proposals by mid-April on a possible extension of a wheat export tax from July 1, when the new 2015 to ‘16 marketing year is due to start, the government said on April 2.

Russia has imposed a duty on wheat exports since Feb. 1 in an effort to cool domestic food inflation as the rouble tumbled. The measure is set to expire on June 30, but traders have expressed concerns the tax could be extended.

Medvedev has asked the ministers for agriculture, the economy and finance, working with industry unions, to provide a justification for maintaining the duty beyond June 30, the government said on its website.

However, the head of a leading agriculture consultancy, SovEcon, said chances were high that the duty would be removed from July 1.

“This view is supported by signs of slowing inflation and by a good situation with crops and stocks in Russia’s south, in Krasnodar and Stavropol regions,” SovEcon’s Andrey Sizov said.

Russia’s economy has been hit by a drop in global oil prices and Western sanctions over Moscow’s role in the Ukraine crisis. Inflation reached a 13-year high in February but has barely risen since then, increasing hopes that the worst was over.

Russia, one of the key wheat exporters to North Africa and the Middle East, exports the bulk of its wheat harvest of the southern regions. The tax is set at 15 percent of the customs price plus 7.50 euros ($8), but no less than 35 euros per metric ton.

Medvedev’s order came days after grain exporters and the Russian farmers’ lobby asked the government to remove the duty ahead of schedule.

Major Russian grain traders are delaying signing forward deals for new crop wheat, usually set at this time of the season, due to the risk that the export tax could be extended, exporters and analysts have said.

Sizov said the Agriculture Ministry would probably take a cautious stance in its response to the prime minister, until 2015 grain crop prospects become clearer later in spring.

The ministry this week set high wheat prices for its restocking program in the 2015/16 marketing year. The move is raising the possibility that the government will not have to extend the tax, IKAR agriculture consultancy said on April 1.

03 April, 2015