In Commodity News 27/04/2015
Wheat buyers hoping Russia will lift its tax on exports are running down stocks, potentially causing a rush of buying to hit the market in the coming two months, traders said.
Russia, one of the world’s largest wheat exporters to North Africa and the Middle East, imposed a tax on wheat exports between Feb. 1 and June 30 to cool domestic food inflation as the rouble tumbled.
Exports have been slowed by the tax, while forward deals for the new crop, which the southern region starts to harvest in late June, have been delayed by government comments on a possible extension of the tax beyond July 1.
“If you look back to the export ban in 2010, they lifted it earlier than expected because of pressure from the trade, especially Russian companies,” a trader said.
“I would not exclude that we see something like that this year as well, especially if the development of the crop continues as it does now,” he added.
Russian officials have repeatedly said the tax would not be removed ahead of schedule.
According to an industry source in Russia, at this time of the season buyers have usually contracted around 5-6 million tonnes of the new wheat crop.
“Now it’s significantly lower … something like 1 million tonnes,” the source said.
The government plans to hold a meeting on the future of the tax by early June, ahead of the 2015/16 marketing year which starts on July 1. The tax is set at 15 percent of the customs price plus 7.50 euros, but not less than 35 euros ($37) a tonne.
Russian wheat prices have been falling in recent weeks due to a combination of farmers needing cash for spring sowing offering competitive prices, high stock levels and expectations for a large crop.
Black Sea forward prices for new crop wheat with 12.5 percent protein content were at $193 per tonne on a free-on-board (FOB) basis at the end of last week, down $14 from a week earlier, according to IKAR consultancy.
Russia’s Agriculture Ministry currently expects the country to harvest up to 100 million tonnes of grains in 2015, 5.3 million tonnes below 2014’s near-record crop.
Once the situation on the tax becomes clearer, buyers may return to the market in more concentration than they did in the past, putting upward pressure on prices, some traders said.
“If there’s a lot of pent up demand then a lot of the buying will happen very quickly when the export tax becomes clear,” a trader said.
