Traders’ concerns over the dent to Russian grain shipments from an export levy have “appeared accurate”, US farm officials said, even amid talk of Moscow adding further red tape to the tariff regime.
US Department of Agriculture officials in Moscow highlighted warnings from the grain trade over Russia’s imposition this month of a levy which, in essence, takes 50% of the value of wheat exported at a price above 11,000 roubles a tonne.
“Industry analysts and traders consider that this floating duty will inhibit future trading in grain, [and] will give the Russian customs service uncontrolled authority for manipulation of the size of the duty,” the USDA’s Moscow bureau said in a report.
The levy will also “make exports of durum wheat, which only recently began to recover in Russia, uncompetitive because the contact price of this wheat in US dollars is high”, meaning it will attract a higher levy than lower-priced grain.
Still, even for cheaper wheat, the bureau highlighted the uncertainty surrounding the levy, given that it is applied on rouble prices of a commodity traded internationally in dollars, at a time of volatile exchanges rates.
At Wednesday’s exchange rate, the levy threshold would kick in at $182.37 a tonne.
However, at the rate a month ago, exports would have appeared free of tax below $200.64 a tonne, leaving a trader who sold then, but shipped now, potentially liable for some $9 a tonne in unforeseen tax payments – equivalent potentially to all their margin on a deal.
The downturn in exports since the levy kicked in “showed that traders’ concerns [over the levy] appeared accurate”, the bureau said.
So far in 2015-16, which also started on July 1, Russia’s overall grain exports have fallen by 34% to 1.3m tonnes, although this may reflect a slower start to harvest too, with farmers having reaped 7.4m acres as of Thursday, compared with 10.3m acres a year before.
More red tape?
The comments came even as Russia’s farm ministry is proposing to add to exporters’ obligations by forcing them to register all contracts with Rosselkhoznadzor, the food safety watchdog, within five working days of sending the grain abroad or after they had signed a contract
According to the Interfax news agency, the ministry has proposed the scheme in a letter to Arkady Dvorkovich, the deputy prime minister in charge of agriculture.
Russia’s grain exporters have a scepticism over handing information to officials, given the government’s record of interfering in the market, including through outright bans on shipments.
Rosselkhoznadzor has a record of imposing trade bans, largely on imports, notably of meat, but was also linked to grain export curbs early this year.
Nonetheless, the USDA bureau forecast only a small drop in Russian wheat exports in 2015-16, of 1.1m tonnes to 21.0m tonnes.
The forecast is 1.0m tonnes below the USDA’s official forecast.
The bureau noted that wheat prices had of late fallen “much lower than the three-years’ average”.
On Monday, analysis group SovEcon estimated Black Sea prices for new crop wheat, with 12.5% protein at $192.50 a tonne on a free on board (fob) basis, a drop of $6 week on week.
Ikar estimated the price at $191 a tonne, also down $6 week on week.
Separately on Tuesday, agriculture minister Evgeny Gromyko pegged the Russian harvest of grains overall at “more than 101m tonnes”, compared with a previous estimate of 100m tonnes.
“If we proceed as outlined earlier, we will manage to deliver the target that is slightly more than 101m tonnes at present and hopefully will perform a bit better,” Mr Gromyko said, according to the Itar-Tass news agency.
“Russia’s food security will be supported in any case.”
The USDA bureau pegged the harvest at 97m tonnes, an upgrade of 5m tonnes from its previous forecast, including a 3m-tonne upgrade to 56m tonnes in the estimate for wheat production.
“The Russian Volga Valley and some eastern parts of the Central and the South federal districts have been seriously affected by dryness, and the average yields of Russian major grain crops are forecast lower than in 2014-15,” the bureau said.
(Source – http://www.agrimoney.com/news/fears-over-levy-hit-to-russia-wheat-exports-appear-accurate–8620.html)