Russia bounces wheat prices

Audio 01:42

Russia harvests 131 million tonnes of wheat in 2020, the second best harvest in its history.

© Pixabay / Andrey Braynsk

By: Claire Fages Follow

4 min

To limit the inflation of flour and bread, the Moscow authorities are considering imposing a quota and a tax on Russian wheat exports.

As a result, world cereal prices are on the rise again, while international demand remains strong.

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Russia has the second best wheat crop in its history, over 131 million tonnes.

But it also responded as it had not done for four years to foreign demand, exporting 23.5 million tonnes of wheat.

Unfortunately this has turned against the Russian consumer.

Food prices have, according to the National Statistical Office, climbed 21% for cereals, 5% for bread, 8% for pasta. 

Tax of 27 euros per tonne to limit exports

President Vladimir Putin took public notice of this in the middle of last week.

Russia's agriculture minister was already leaning towards a quota to limit wheat exports.

According to the Union of Russian Grain Exporters, a tax of 1,000 rubles per tonne, around 27 euros, should also be applied on shipments until the next harvest.

Record world imports in November

This prospect made wheat prices rebound at the end of last week: + 4% in Paris at 211 euros per tonne, + 7% in Chicago.

Global wheat availability is expected to tighten, with further concerns about very dry sowing conditions in Russia and the United States for the next harvest.

At the same time, demand from importing countries in November hit records.

Jordan, Turkey, Philippines, South Korea, Japan, all of these countries are shopping.

And that's on top of unexpected demand for wheat this year from Pakistan (2.5 million tonnes) and China (8.5 million tonnes).

In 2020-2021, this leads to a record of world wheat imports.

Lots of precautionary purchases in these times of Covid.

Hence the upward trend in prices, despite the abundance of production and stocks.

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