New quotas, taxes challenge Russian wheat export target

Spanish Market: Agriculture
12/11/21

Russia's wheat exports could miss the government's 31.5mn t target this year following a planned introduction of shipment quotas alongside changes to export duties, weighing on already tight global milling wheat supply.

The Russian agriculture ministry earlier this week confirmed plans to introduce quotas on grain exports in February-June next year, including a wheat-specific quota. The floating export duty formula, currently calculated on a weekly basis, could also be modified to impose higher taxes in case global wheat prices rise further, to around $400/t, the ministry said.

The export quota could be set at just 5mn t for 15 February-30 June, market participants said, citing the Russian government's plans to curb domestic food inflation and raise crop stocks.

This implies that Russia may not hit the 31.5mn t target by the end of the 2021-22 marketing year on 30 June 2022, as exports are unlikely to reach 26mn t by the time the quotas are introduced, agribusiness firm Agrozan Commodities' country manager for Russia, Sabina Sodikova, told Argus. Russian wheat exports have reached 13.9mn t so far this season, compared with 18.8mn t in the previous year.

Russia's wheat shipment pace slowed as the floating duties on crops have risen gradually to hit around $70/t from $30/t in August, tracking higher global wheat prices. But in return, this further squeezed global wheat supply availability as Russia is the world's largest exporter.

The floating duties could rise further until February without any changes to the formula owing to steady gains in the international market. Black Sea wheat prices have risen by around $100/t since their year-low in July, extending near constant gains over the period, Argus assessments show.

This suggests that Russian exporters may struggle to significantly boost shipments at the start of next year ahead of quotas, as they did in 2020-21 before the government introduced similar restrictions on shipments in February, with no taxes imposed on wheat exports at the time.

Weekly changes in export duties have made wheat prices unpredictable for producers and exporters, and have weighed on the pace of exports. The wheat quota should be set at a minimum of 10mn t to prevent further price rallies and duty increases, Sodikova said.

Options

The government can either reduce the base price used in the tax calculation formula — $200/t for wheat and $185/t for barley and corn — or raise the current 70pc rate on duties. But the final decision will depend on price movements in the global market, chairman of the Russian Union of Grain Exporters, Eduard Zernin, told Argus.

Importers globally could absorb all wheat shipped from Russia, with the country's agriculture ministry estimating 2021-22 grain export potential at 44.5mn t. The question now is where the government will set the grain quota and the share of wheat in the mix, Zernin said. The government is not expected to announce quota levels before the end of 2021.

By Alexey Yeromin

Ukraine and Russia fob wheat prices $/t

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US biofuel feedstock use dips in August

31/10/24

US biofuel feedstock use dips in August

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US court set to weigh biofuel blend mandates

31/10/24

US court set to weigh biofuel blend mandates

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US ag trade deficit looms over US election

29/10/24

US ag trade deficit looms over US election

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Seca no Brasil: Níveis dos rios voltam a subir

25/10/24

Seca no Brasil: Níveis dos rios voltam a subir

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