Wheat rose to a six-year high in Chicago after top exporter Russia said it is ratcheting up efforts to cool domestic food inflation by curbing grain exports.
Russia on Friday said that a new duty on shipments would rise even more than expected, just a few weeks after being imposed in the middle of next month, and taxes would continue at some level after the current season ends in June.
The government had announced an initial tax last month, alongside a grain-export quota, after Russian President Vladimir Putin demanded action following sharp increases in prices for pantry staples.
Photo: Reuters
The Russian measures, combined with tightening supply elsewhere and surging Chinese demand, have already helped drive global grains prices to multiyear highs. That is stoking worries over global food inflation at a time when hunger is surging around the world due to the COVID-19 pandemic.
Russia’s wheat duty is to double to 45.36 euros (US$54.79) a tonne on March 1, the Russian Ministry of Economic Development said in a statement.
Earlier this week, the Ministry of Agriculture proposed an increase to 40.82 euros a tonne from March 15.
Levies on corn and barley would also come into force from mid-March.
While other wheat shippers such as Australia have had bumper harvests, Russia plays a vital role in global supply and its grain would still be needed in the latter part of the season, said Andree Defois, president of consultant Strategie Grains.
Chicago wheat futures reached the highest since 2014 after the government announcement and Paris milling-wheat is set for the biggest weekly gain in four years.
That puts extra pressure on big importers such as Egypt, which purchases large amounts of wheat from Russia each year because its prices tend to be cheaper than most other sources.
“If the world could afford to go without Russian wheat, it wouldn’t be a problem,” Defois said, adding that importers would try to postpone purchases, but “they still need to buy for nearby positions.”
Analysts also previously speculated that the protectionist measures could prompt Russian farmers to delay sales until the curbs were lifted at the end of the season — putting more pressure on shrinking global supplies.
Consultant SovEcon last month cut its estimate for exports this season by 11 percent.
However, the Russian government made it clear that duties would remain in place for the long-term.
“There is no sense in holding the grain and waiting,” Russian Minister of Economic Development Maxim Reshetnikov said in the statement.
Eduard Zernin, head of the Russian grain exporters union, said that the increased tax would likely be absorbed by export markets and partly by the domestic one.
The group is seeking talks with the government on how to set a formula for duties on shipments from July 1, so that traders can have more predictability.
“I don’t think the traders’ exports will be seriously adjusted from the plans,” he said. “The global market remains in high demand for our grain.”
Other commodities:
‧ Spot gold dropped 1.1 percent to US$1,826.59 an ounce, down 1.21 percent for the week, while silver fell 3.11 percent to US$24.74, a weekly decline of 2.69 percent.
Additional reporting by Reuters
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