Russia lifted the duty on wheat exports on Friday to help domestic producers and the government said the move would boost overseas sales by one million tonnes. One of the world's major wheat exporters, Russia initially imposed the tax from February 1 until June 30 to dampen rising domestic prices and food inflation following a sharp fall in the value of the rouble late last year.
But Russian wheat prices have been falling and the government had indicated it would lift the duty on May 15. A new export duty is expected to be introduced from July 1, calculated under a different formula. The government said the removal of the duty would boost Russian wheat exports by one million tonnes but gave no timeframe for the figure.
"The document (authorising the lifting of the duty) is aimed at supporting domestic producers," it said in a statement. An agriculture ministry spokeswoman confirmed to Reuters that Russian exporters would pay no fees for selling wheat abroad from Friday until the introduction of the new export duty on July 1. "We are getting rid of the 2014 harvest," she said.
Industry analysts welcomed the announcement but said conditions would remain tough for domestic producers. "We see a large surplus stock of wheat in southern Russia. When they made the decision on duty several months ago, world wheat prices were in the $240-es, while nowadays the new Russian wheat crop is in the middle $185-s," said Dmitry Rylko, director of the Institute for Agricultural Market Studies (IKAR).
"This is very painful for domestic wheat farmers even after the lifting of the duty lifting. So short-term we don't see a big change: lifting the duty has already been in the price for the past couple of weeks, while the price looks awful". In emailed comments to Reuters, the agriculture ministry said officials were now discussing the new duty formula, under which exporters will pay $1 per tonne in duty as long as the domestic price does not exceed 12,000 roubles ($240) per tonne.
Analysts said the new proposals would make Russian supplies cheaper for overseas buyers and further dampen interest in other wheat on the world market. The duty lifted on Friday had amounted to 15 percent of the customs price plus 7.5 euros and was no less than 35 euros ($43) per tonne. From the start of the 2013/14 marketing year on July 1, 2013, till June 25, 2014, Russia exported 25.2 million tonnes of grain, including 18.2 million tonnes of wheat, the agriculture ministry said.