Russia may tax grain exports to tame inflation

2011-10-12 11:20:04

Russia, set to become the second- biggest wheat exporter a year after its worst drought in half a century, may impose duties to restrict exports in an effort to control inflation.

The government may tax shipments once they reach 23 million to 24 million metric tons for the marketing year, Viktor Zubkov, first deputy prime minister, said in Moscow today. Russia barred all cereal exports last year, helping wheat to jump 47 percent for 2011 in Chicago trading.

“That’s still near a record,” said Erin FitzPatrick, a London-based analyst at Rabobank International. “I don’t think the market is pricing in more than that, with or without the government getting involved. Bigger crops are expected from Canada, Australia and the U.S.”

Wheat for December delivery rose 5.6 percent to $6.46 a bushel by 5:36 p.m. London time on the Chicago Board of Trade. Prices have slid 21 percent since May 27, the last close before Prime Minister Vladimir Putin said Russia would let the export ban expire as scheduled July 1.

Grain exports reached 10.7 million tons as of today and may climb to 18 million to 19 million tons by January, Zubkov told reporters. The national crop may reach 90 million to 92 million tons in the year through June, with consumption at 72 million tons, he said.

10 Days’ Notice

Imposing a duty would be a “wise” signal to traders, said Andrei Sizov Sr., general director of Moscow-based researcher SovEcon. Last year the government gave just 10 days’ notice of the export ban, which took effect Aug. 15.

The possible restriction on outbound shipments is aimed at controlling food inflation and ensuring domestic supply, according to Zubkov. The government aims to maintain prices in the country at a “comfortable range” of 5,600 rubles ($177) to 6,500 rubles a ton, he said.

Exports at the level targeted by Zubkov for levying the tax would be a “historic record” for Russia, according to Sizov. Russia shipped a record 23.2 million tons of grain in the 12 months through June 2009, Rabobank estimates.

Putin, 59, said Sept. 24 he’ll seek to return to the presidency in March elections, pushing aside protege Dmitry Medvedev, who replaced him in the Kremlin for four years because of a constitutional ban on three consecutive terms. Russia also holds parliamentary elections in December.

Russia restricted grain exports via duties in the 2007-08 season to curb inflation, when it also held parliamentary elections in December and a presidential vote in March.