Russian Bakers Want Change to Wheat Duty That Tries to Help Them

Russia should change a levy on wheat exports that led to a slump in shipments last month, according to the local bakers and pig farmers the policy is trying to help.

Sales abroad by Russia, the third-largest wheat exporter, fell 53 percent in July from a year earlier to the lowest level for that month since 2009, according to figures from grain carrier ZAO Rusagrotrans and the government. The drop followed the enforcement of the export duty to shield bakers and farmers of livestock from rising prices amid double-digit food inflation.

“We support regulating exports,” said Valery Cheshinsky, president of the Russian Union of Bread Baking Industry. “But we don’t wish harm to anyone.”

The bakers’ lobby, whose members produce more than half of Russia’s bread, is joining the National Pig Farmers’ Union in supporting calls for changes to the levy, with Prime Minister Dmitry Medvedev seeking proposals on the issue by Sept. 10. Concerns include the possibility that Russian wheat farmers will sow less of the grain if exports continue to decline.

The tax should be a certain percentage of the customs value of shipments or a fixed amount, replacing the current more complex formula, according to Cheshinsky. That would make the situation more predictable for exporters and allow flour millers to build reserves at the start of each season when prices are typically lower, he said.

Pig Union

Proposals by the Moscow-based pig farmers’ group, representing 174 companies, would limit wheat exports based on expected local supply and demand, according to Yury Kovalev, its president. When shipments reached a certain level, the country would apply a ban or prohibitive export tax, he said by phone. Wheat farmers may sow less if exports shrink a lot, he said.

“If they have problems because of the tax, we might win in terms of prices during one season,” Kovalev said. “But we may run into problems ourselves in the following seasons if wheat supply is down and prices shoot up.”

While Glencore Plc’s Russian unit said Tuesday an export cap was a possible solution for regulating trade, Deputy Prime Minister Arkady Dvorkovich said later the same day that the government wasn’t planning to introduce such a measure.

Russian wheat exports fell to 1.28 million metric tons in July, according to a report e-mailed by Rusagrotrans on Tuesday. The nation’s wheat crop creates potential for outbound shipments of the grain to reach a record 23 million tons in the 2015-16 season that started July 1, the U.S. Department of Agriculture said on Aug. 12.

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