Russia Sees Bumper Harvest and Low Ruble, But Wheat Exports Down, Industry in Confusion
Russia is seeing a bumper harvest this year, and combined with a devaluation of the ruble, the country should be taking advantage of a boom in wheat exports, but instead shipments have been down by 25% for the month of August.
Beginning July 1, Putin’s government has imposed a sliding-scale export tax that increases as the ruble weakens as a measure to try to control prices of key staple foods, such as bread amid 13-year high inflation.
The tax charges exporters a minimum 50 rubles per ton, but if prices climb above 11,100 rubles per ton, which they have for the majority of July and August according to Bloomberg, the tax rises. In August, Russian wheat cost $184 per ton in dollars, but converted into rubles, the price has increased 20% to 12,700 rubles since the beginning of July – leaving Russian exporters unable to offer prices that would win them a tender on August 28 to sell to Egypt’s state buyer. The buyers ended up turning to Ukrainian suppliers.
Confusion is widespread throughout the industry regarding the scale of the slump in exports. Bloomberg reports that Igor Pavensky, deputy marketing director of Russian grain trader, Rusagrotrans has used port shipments to estimate that exports in the month of July fell 19% from July 2014, while government data indicates a decrease of 46%.
Bakers and pig farmers are calling for a repeal of the tax, concerned that farmers will cut sowing, reducing next season’s wheat supply, while farmers are holding back on selling their wheat in expectation that the ruble will continue to fall and the tax may be repealed or relaxed.
It is uncertain what path Russia will take, but it is certain that the country will need to find markets for its bumper wheat crop in the coming months. Moscow-based SovEcon estimates that Russia will harvest 62 million tons of wheat this season, making it the country’s third biggest harvest, and the U.S. Department of Agriculture (USDA) estimates that Russia will ship a record 23 million tons this year.