September 21, 2007

Russia may slap 10 percent export duty on grain

Russia will impose a 10 percent export duty on grain in the event of grain intervention, according to acting economics minister German Gref Thursday (September 20).

Gref said the relevant decision had already been made and would be announced next week if Russian grain prices exceed the established margin.

The official failed to specify the price margin.

Gref has repeatedly spoken in the past two months about the need to impose grain intervention as soon as possible. He described bread prices and the situation on the grain market as a major threat to the government's inflation target of 8 percent.

However, the need to introduce grain intervention was not so obvious. Kommersant, a respected business daily, said earlier that grain prices had reached a record level of 6,300 rubles (US$250) per tonne of class 4 wheat and 5,700 rubles (US$226) per tonne of forage fodder in July 2007. Prices of bread, flour and other wheat-based food products also grew as a result.

However, early in September Agriculture Minister Alexei Gordeyev said it would not be necessary to launch grain intervention before late November, until after preliminary results of this year's harvest have been assessed.

The Agriculture Ministry's position was backed by a letter to the government from the heads of over 50 grain farms. They warned that "export limitations will result in a slump in grain prices on the domestic market and consequently losses for grain producers."