Russian wheat is becoming more expensive due to an internal tax on wheat exports, a situation that has implications for the global wheat market.
The Russian government imposed a tax on wheat exports in mid-February on a temporary basis, and made it permanent in mid-June. The tax was part of efforts by Russian leader Vladimir Putin to get food prices under control. The price of bread rose 7.8% in 2020 and has gone up 3% more so far this year.
Investments in agricultural technology over the last few years have made Russia into the world’s biggest exporter of grain. Farmers worry that the tax will cut into their profit margins.
Even with the tax, Russian wheat is still competitive on the world market, according to Reuters. But the tax fluctuates, which creates a problem for grain traders who have to arrange sales weeks in advance of delivery.
Since the tax became permanent in June, Egypt, a major grain importer, cut its purchases of Russian wheat in June to 60,000 tons, compared with 120,000 tons in February and 290,000 in April.