Wheat price rose last week in part because Russia is further tightening its export policy.
The wheat price is peaking on the futures market in Paris. The first-expiring contract (March 2021) closed on Friday above € 230 per ton. Such a high price for a first-expiring contract has not been seen in Paris since May 2013. On Monday during the trading day, the quotation for the March contract briefly touched the € 234. In the Chicago futures market, the wheat price reached its highest point in 6 years.
A major cause of the rising wheat price is the grain forecasts published last week by the United States Department of Agriculture (USDA) and the International Grains Council (IGC). Both leading market analyses indicate that there is less grain and soybeans available in the world than previously thought.
A second major cause of the price increase is Russia’s government policy. The government will impede exports even more, which will push the wheat price up further. At the beginning of January, the Russian government decided to introduce an export tax on wheat of € 25 per ton from February 15 to June 30. During that period, a maximum of 17.5 million tons of wheat may be exported. The levy and export quota were announced in December. That led to a price hike in the wheat market, as Russia is the largest wheat exporter in the world. With the levy and the export quota, the government wants to prevent wheat from becoming even more expensive in Russia.
Wheat in Russia has become on average $ 25 per ton more expensive in the past month, market agency APK-Inform reports. To counter further price increases, the government wants to double the export tax for wheat from € 25 to € 50 per tonne of wheat from 1 March. According to market agency Agritel, the government is considering taxing the export of barley with € 10 per ton and that of maize with € 25.
Russian Economic Affairs Minister Maxim Reshetnikov is considering the continuation of the export restrictions in the 2021/2022 season, which starts July 1. “The decision is primarily aimed at protecting the interests of the domestic market, safeguarding domestic needs and avoiding the risks of new price hikes,” Reshetnikov said in a statement. The Russian export policy is laying solid ground in the wheat market, as can be seen on the futures markets.