Russian exporters ‘will not flood the market with wheat’
Farmers are not likely to sell their stocks at low prices ahead of tax imposition
The announcement of export tax on Russian wheat in the second half of the marketing year triggered price volatility last week. However, local exporters are reluctant to get rid of their stocks, as next year’s crop may be poor.
Grain exporters look unlikely to accelerate shipments of Russian wheat before an export tax is implemented in mid-February, says Reuters adding that farmers are expected to be in no rush to release supplies, particularly given poor prospects for next year’s harvest. The tax, which is part of efforts to stabilise food prices, will amount to 25 euros ($30,46) per tonne of wheat exported between 15 February and 30 June.
The news about the tax has caused volatility in international prices. Some market players expected a short-term rise in Russia’s export sales, so wheat could be shipped before the tax takes effect. Nonetheless, after being reluctant sellers earlier in the season as they benefitted from high prices, Russian farmers are now likely to resist releasing grain more cheaply. A poor outlook for next year’s crop is also making farmers wary of selling this year’s grain at a low price. At the end of November, around 22% of Russia’s winter grain sowings were in poor condition.
According to SovEcon agriculture consultancy, the tax may reduce Russia’s 2020-2021 wheat exports by 2-3 million tonnes from previously projected 40,8 million tonnes. However, the fallout may be deferred due to the year-end holidays and advance contracts for export sales. Russia’s 2020 harvest has been second-biggest on record, and the country is still holding a large part of it, so sizeable volumes will need to be shipped.
“Russian farmers need time to digest the hit,” commented a European trader. “The export tax and quota have all happened so quickly that sellers in Russia are in a bit of a state of shock.” According to another European trader, the market will find a way to balance fairly quickly. “Part of the Russian tax the farmer will pay, part will be covered by more competitive throughput costs, and then market prices will be a bit more firm.”
Exporters themselves fear that the Russian government’s latest intervention in grain markets may have longer-term repercussions. “What other countries tell us — if you have become [export] leaders, then be responsible for the stability of your supplies,” said head of the Russian Union of Grain Exporters Eduard Zernin. “So the situation in which we find ourselves now, when a whole set of export restriction measures is introduced, it is really discouraging,” he added.