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Russia increases wheat export tax Rb426 to Rb5,985/mt for July 20-26: ministry

Highlights

Russia switches to ruble-denominated duty from July

Duty is recalculated weekly based on trailing average of prices

Russia's agriculture ministry on July 15 set the variable export tax on wheat at Rb5,984.9/mt ($103/mt) for the July 20-26 period.

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The rate was up by Rb426 from the previous seven-day period.

Russia's wheat sellers typically price their exports in dollars and procure wheat on the domestic market in rubles. That trade has recently become more complicated as a result of the ruble's volatility and the reduced convertibility of the Russian currency.

Russia introduced a fixed duty on wheat exports in February 2021 in response to rising global prices. The country then moved to a variable rate on June 2, 2021. It is published each Friday and enters into force on the Wednesday of the following week.

The rate had been set in dollars until June 28, when the Ministry of Economic Development said it would switch to rubles and changed the mechanism it used to calculate the duty.

The export duty is calculated as a percentage of the difference between a base price and the average of export prices on an FOB basis during the 60 days preceding the day of calculation.

Since these FOB prices are in dollars and the duty is set in in the Russian currency, the government converts the average into rubles using the central bank's exchange rate over the previous five days. That rate was 57.5 rubles to the dollar on July 15.

When it was calculated in dollars, the duty was equivalent to 70% of the premium of that average above $200/mt, with even higher rates applied when the average price exceeded thresholds at $375/mt and $400/mt.

Under the new ruble-based mechanism, the initial threshold, or base price, was set at Rb15,000/mt instead of $200/mt.