Russian Wheat Farmers Seen Bearing Cost of Producing More Meat

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Russia’s efforts to expand its livestock industry are coming at the expense of grain farmers.

Wheat sales to overseas buyers may drop as much as 29 percent to 15 million metric tons next season if a proposed tax on exports takes effect, according to Arkady Zlochevsky, president of the Russian Grain Union. That would be the lowest in three years, when dry weather scorched crops, data from the U.S. Department of Agriculture show. Traders would pass tax costs onto farmers by buying wheat at a discount, Zlochevsky said.

“Activity by exporters will take a dive,” he told reporters at a press conference in Moscow on Wednesday. “The proposed tax formula carries additional risks for them.”

The tax is intended to prevent rising animal-feed costs as Russia increases food production and replaces banned products from the U.S. and European Union. The Agriculture Ministry this week recommended taxing wheat exports to keep domestic grain prices down and support the livestock industry.

The proposed tax would take effect July 1, about six weeks after the country canceled a similar levy that reduced exports this season. The tax would be at least 1 ruble per ton and may be higher if free-on-board contract prices rise above 11,000 rubles ($210) a ton.

Contract Prices

Contract prices are normally in U.S. dollars, so the tax will depend on the exchange rate at the time of export, usually 1.5 months after a trader buys wheat from farmers, according to Zlochevsky.

Andrey Sizov Jr., managing director of researcher SovEcon, put his estimate for wheat exports next season at 18 million to 19 million tons if the tax is approved.

Prices for next season’s crop rose 2.7 percent to $190 a ton in the week to May 18 and were unchanged the following week, according to data from Moscow-based grains carrier ZAO Rusagrotrans.

Prime Minister Dmitry Medvedev ended the previous tax earlier than planned after slowing inflation eased concerns over bread costs. The tax, first imposed on Feb. 1, was designed to rein in food prices after the ruble collapsed last year and the economy buckled under plunging oil prices and sanctions over the Ukrainian conflict.

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