After much discussion about a possible Russian export tariff on wheat, this measure will be official on Monday 14 December. From February 15 to July 1, each exported tonne of wheat will be taxed at €25. The Russian Ministry of Economic Affairs has announced this.
Even President Vladimir Putin interfered himself with the wheat market last week, saying that bread has become too expensive in his country. In a report on state television, he said that the price of bread, among other things, has risen by 6,3%. The price of flour by almost 13% and that of sunflower oil by almost a quarter. The price of pasta rose by 10%. At the same time, the income of the average Russian fell by 8% between April and June. Maxim Reshetnikov, the economy minister, was given a week to solve it.
Meanwhile, the Russian export engine for wheat, among other things, is running at full speed. The country had a good harvest and this is being pushed hard worldwide. Demand is sufficient and despite price increases, wheat remains competitive. A levy of €25 per tonne will change that. The idea is that this will make it less interesting to export wheat, causing prices to drop. That is good for the domestic market. Analysts previously took into account an export volume of more than 40 million tons. That estimate is now falling to about 37 to more than 38 million tons.
Consequences for the market
Wheat exports already had a limit of 17,5 million tons for this season. Until the new harvest is on the market, a levy per tonne is therefore levied. This could have a long-lasting impact on the global wheat market. The US, in particular, is struggling to keep up with the price. That becomes easier now. Europe lost important destinations in the Middle East. This too can change. The market reacted to rumors last week. The Matif quote for March 21 shot from €201 to €210.
For Putin, it's about more than just the price of bread or pasta. Its popularity is on the wane. Being young people in particular no longer stands behind the president. More and more Russians live below the poverty line of €158 income per month.
Market is stuck
Meanwhile, exporters are already pre-sorting for the export levy. Wheat prices have fallen by $25 per tonne in the country. Farmers are firmly in the saddle. They have been able to sell their good harvest for high prices and now offer little supply. They still have their other crops to sell (such as maize and barley) and hold onto their remaining wheat stocks.
Analysts are therefore taking into account that a larger amount of wheat will be postponed to the 2021-22 season than previously thought.