In a bid to manage high inflation and potential supply issues, Russia, the world’s largest wheat exporter, has announced a nearly 32% increase in its wheat export duty. This decision, made public on Friday, comes as the country grapples with the poor condition of winter crops.
Key Highlights:
Duty Increase Details:
The export duty has risen from 257 roubles ($2.60) to 4,871.5 roubles per ton since mid-August. Despite this increase, wheat exports have remained robust, nearing record levels in recent months.
Crop Condition Concerns:
Leaked data from the state weather forecasting agency indicates that over 37% of winter crops are in poor condition or have failed to sprout due to low soil moisture. This marks a significant deterioration compared to just 4% last year, representing the worst recorded condition.
Official Statements:
Deputy Prime Minister Dmitry Patrushev acknowledged the uncertain outlook for next year’s harvest but stated that the situation is not yet critical. Leading consultancies have maintained their current forecasts, with estimates ranging from 79 to 89 million tons for 2025.
Market Reactions:
European traders suggest that the Russian government’s decision to raise export taxes may be aimed at addressing the low prices at which Russian wheat is being offered, despite existing export taxes, quotas, and minimum price regulations.
Impact on Global Prices:
Analysts believe that the increase in export duty could support global wheat prices, contingent on a rise in Russian export prices. Currently, Russian wheat is among the cheapest available globally, with prices for 12.5% protein wheat around $223-$227 per ton on a free-on-board (FOB) basis.
Export Quotas and Predictions:
Last month, Russia reduced its wheat export quota for the second half of the export season from 15 million to 11 million metric tons. Analysts predict that wheat exports will decline to 41-42 million tons in the 2024/25 season, down from 55.5 million tons previously.
Moisture Concerns:
The lack of moisture in key agricultural regions raises alarms about the potential for a poor harvest. Farmers warn that if moisture levels do not improve, the country risks facing a significant agricultural crisis.