Miller Magazine Issue: 135 March 2021

44 NEWS MILLER / march 2021 Russia approves formula-based grain export tax system The Russian government approved a formula-based export tax system for wheat, corn and barley that is designed to help combat domestic food price inflation. The system will come into force on June 2, according to an order signed by Prime Minister Mikhail Mishustin. The switch to a formula, which will take place a month earlier than previously planned, will mean the tax will automatically rise in response to any increase in prices. The formula will be set at 70% of the diffe- rence between a base price for wheat per tonne and $200, the government said. Russia previously imposed a series of fixed tariffs on exports, which started from Feb. 15 and will be in place until the formula is applied. The tax is designed to cut domestic prices as it curbs exports and therefore increases the amount of whe- at available within the country. The new formula for barley and corn will be similar to that used for wheat, but will use $185 instead of $200 for calculations, the government said. Analysts think floating export tax will negatively af- fect the Russian farmer’s desire to grow wheat. “I think we’re very likely to see a decreased area in the medi- um term if that tax stayed there and we’re very likely to see a smaller production. Smaller investments in a hectare mean that farmers would be caring for all his costs and applying less fertilizer, cheaper crop protecti- on. And that implies that country will depend more on the weather. So that implies that Russia will likely lose its number one spot in the world wheat export market in the medium term,” says Andrey Sizov, the Managing Director of SovEcon. This is not the first time that Russia has imposed trade-restrictive measures on its grain, but now as Russia accounts for higher production and proportio- nally more export share, the restrictions have a larger impact in the global arena. Russia is projected to ac- count for 20 percent of the global wheat trade, even with a downward adjustment to account for these new measures. Russia’s top wheat markets are be- ginning to respond to these measures. As the largest global wheat importer, Egypt relies on Russia for more than half of its imports. However, Egypt’s recent ten- ders have sourced instead from Ukraine and Romania for February shipment.