Russia's wheat sellers welcome shift to ruble-denominated export duty

Russia's agriculture ministry on July 8 set the variable export tax on wheat at Rb5,558.9/mt ($87.88/mt) for the July 13-19 period, as the country's grains traders welcomed a significant reduction in their tax burden.

The lower taxes are a result of Russia's switch from a dollar-denominated rate and its adoption of a different mechanism for calculating the tax, which is reset each week.

The rate for July 13-19 shipments was up by Rb958.9 from the previous seven-day period, the first time a ruble-denominated rate applied. The ruble rate is equivalent to around 22% of the ministry's trailing average FOB price, whereas wheat exported from Russia June 29-July 5 was taxed at $146.10/mt, or around 36% of that average.

Russia's wheat sellers typically price their exports in dollars and procure wheat on the domestic market in rubles. That trade has recently become more complicated as a result of the ruble's volatility and the reduced convertibility of the Russian currency.

Russia introduced a fixed duty on wheat exports in February 2021 in response to rising global prices. The country then moved to a variable rate on June 2, 2021. It is published each Friday and enters into force on the Wednesday of the following week.

The rate had been set in dollars until June 28, when the Ministry of Economic Development said it would switch to rubles and changed the mechanism it used to calculate the duty.

The export duty is calculated as a percentage of the difference between a base price and the average of export prices on an FOB basis during the 60 days preceding the day of calculation.

When it was calculated in dollars, the duty was equivalent to 70% of the premium of that average above $200/mt, with even higher rates applied when the average price exceeded thresholds at $375/mt and $400/mt.

Under the new ruble-based mechanism, the initial threshold, or base price, for calculating the export duty was set at Rb15,000/mt.