Market update/
Russia imposes export tax on pulses effective October 1

In a surprising move, the government of the Russian Federation communicated on Thursday that many goods out of the region will be subject to an export tax as of October 1. The value of the tax will be a floating percentage depending on the ruble exchange rate with the US dollar. 

“For now, it looks like with the current exchange rate the tax is 7%,” said Cem Bogusoglu of Delta Corp.

Rustam Guliev of Top Grain believes the announcement leaves many questions unanswered:

“We don't know the correct list of commodities but for sure the list includes peas, chickpeas and lentils. For all the cargoes loading in Russia, starting from October 1 the 7% duty will be applicable in case the dollar rate is 95 rubles or higher. If tomorrow the [US] dollar rate falls to 80 rubles or below then all export duties will be lifted,” he commented. 

The question remains as to why this decision was taken and how it will impact trade. Gaurav Jain of AgPulse Analytica thinks the move will not significantly affect volumes out of Russia.

“It won't affect volume but prices may go up by $5-10/MT at FOB level. The rest of the tariff will be absorbed by the farmers.”

Guliev elaborated on the price impact: “For sure all exporters will increase the prices to compensate for their losses. Now it will depend on if the international market will accept the new levels or not. In case the market stays stable then obviously exporters will try to reduce the farmer's price. Let's see how it goes.”

Cem Bogusogulu agrees that the situation needs time. "It's going to take some time to balance out," he said. "In the short term, we're going to see traders trying to pull on their side and put the tax duty on the farmer side but the farmers don't have much room to decrease prices as they have huge input costs due to inflation. I think Russian farmers are rich enough to resist the pressure and I don't think they will be keen to sell at cheaper prices. With some time we will see a balance between traders' compromise and farmers' compromise."