Russia Imposes Wheat Export Duty—But Exports Still Second Highest On Record

The Russian government recently announced a wheat export duty, effective February 1 through June 30. As the Russian ruble depreciated significantly over the last several months, wheat was exported at a record pace, and domestic prices rose sharply. The government attempted to slow exports by enforcing sanitary and phytosanitary standards, limiting railcar loadings, increasing the intervention price, and then implementing the duty. Exports are expected to be uncompetitive once the duty is in place.

Although Russia's wheat export forecast is cut from a record 22 million tons to 20 million this month, it remains the second highest on record. More than 80 percent of the forecast was shipped by the end of 2014. Russia's exports are expected to continue through January as exporters fulfill contracts before the duty takes effect.

The global impact on trade is expected to be minimal because other exporter supplies are abundant. Prices initially spiked with the announcement of the duty but have since subsided. Russia's major markets are in the Middle East and North Africa. With competitive prices, plentiful supplies, and proximity to major markets, the EU and Ukraine are in the best position to take advantage, although other exporters may also benefit.

OVERVIEW

Global production for 2014/15 is projected at a new record. Global trade is up slightly as higher projected imports, primarily in the EU and Iran, more than offset cuts in China and Ethiopia. Russian exports are slashed as a result of an export duty that takes effect February 1. Exports for EU and Ukraine are raised as both are in the best position to benefit from Russia's declining presence in the market. U.S. trade is unchanged, but the season-average farm price is raised slightly.

U.S. PRICES:

Export prices for all wheat classes dropped in December. Hard Red Spring (HRS) plunged $62 to $307/ton because of improved rail logistics and falling freight costs. The export quote is the lowest since July 2010. Hard Red Winter (HRW) prices slid $14 to $274/ton. Soft Red Winter (SRW) fell $8 to $263/ton, and Soft White Winter (SWW) tumbled $26 to $261/ton for reasons similar to those of HRS.

TRADE CHANGES IN 2014/15

Selected Exporters

  • Canada is up 500,000 tons to 23.5 million on the pace to date and strong global demand for durum.
  • EU is boosted 1.0 million tons to 30.0 million on reduced competition from Russia.
  • Iran is raised 500,000 tons to 1.2 million on reports of greater flour exports to neighboring countries.
  • Russia is cut 2.0 million tons to 20.0 million because an export duty that begins February 1 is expected to curtail shipments.
  • Ukraine is raised 700,000 tons to 11.0 million with new opportunities in the EU due to the preferential duty-free quota and reduced competition from Russia in other markets.

Selected Importers

  • EU is up 500,000 tons to 5.5 million on expectations that Ukraine will export feed-quality wheat to southern EU countries.
  • Iran is boosted 500,000 tons to 6.5 million on continued strong purchases and recent deliveries