By Michael Anderson, USW Assistant Director, West Coast Office
On Nov. 13, 1991, the Chicago Tribune ran this headline: “Soviet Bread Prices Skyrocket By 600%.” Bread was already in short supply and if you bought it that morning, you would have paid 60 kopeks, by that afternoon it was 3.60 rubles.
Apparently, the memory of such an event nearly three decades ago is still fresh in the mind of Russia’s President Putin. After he criticized the high price of flour and bread recently, the government quickly announced plans for wheat export taxes and an export quota, even though Russian farmers produced a massive wheat crop for this marketing year.
U.S. Wheat Associates (USW) is not surprised. Despite making up a quarter of the worldwide wheat market, Russia continually insists on controlling exports to keep domestic food prices under control.
Over the last 13 years, Russia has placed some form of restriction on wheat exports six times, including twice in the last year. And, as a result, that choice always led to unnecessary disruptions to wheat buyers from the run up in world wheat prices and uncertainly over supplies.
In 2007, for example, Russia had one of its best crops ever to that point, harvesting just under 50.0 million metric tons (MMT) of wheat. Despite the steady increase in Russian production, a steep rise in the domestic price of wheat was remedied by a 10 percent export tax followed by a 40 percent export tax in January 2008, that continued until July of that year.
Drought and record high temperatures caused severe damage to the 2010 Russian harvest. While global wheat prices tripled, Russia enacted a complete ban on Russian wheat exports that lasted from Aug. 15, 2010, through July 1, 2011.
In early 2015, a depreciation in the Russian ruble led to attractive Black Sea wheat prices. Traders exported a record amount that season. To slow down exports, Russia once again applied an export duty. The tax was lifted in May but implemented again in July (the Russian trade calendar runs from July 1 to June 30).
When uncertainty over the impact of COVID-19 erupted in the spring of 2020 a Russian export quota of 7.0 MMT was applied to the April 1 to June 30, 2020, shipping window. By the end of April, that quota was exhausted and put a stop to all Russian wheat exports until July 1, 2020, the beginning of the new export calendar.
Which brings us to today. Russia has once again announced plans for an export quota that will run between Feb. 15 and June 30, 2021. The plan calls for a €25 per metric ton (MT) export tax on wheat ($30.40/MT) until a 17.5 MMT quota is met – at which point wheat exports will be stopped.
Aside from export taxes and outright bans, the Russian grain industry has also seen rail shipments slow the movement of wheat to export terminals, increased scrutiny on approval paperwork on exporting vessels and a slowdown in receiving phytosanitary certificates to as many as six days.
In fact, grain traders have told news services that they are already experiencing delays in obtaining export documents from Russia’s customs service.
Fortunately, the U.S. wheat industry offers reassurance in the fact that our doors are open for business 365 days per year. In our collective efforts to efficiently supply the widest range of the highest quality wheat in the world, we live up to our claim as the world’s most reliable supplier.