Russia is scrambling to slow down rising food costs within its borders.
Fueled by the combo of pandemic-related uncertainty and a drought-stricken wheat crop, Russia is grasping for anything to bring stability to its domestic food and grain markets.
And last week, the country announced a preemptive wheat export tax increase…on a tax that’s not even in place yet.
A 25 euro per tonne tax that begins February 15th will now double to 50 on March 1st.
Why it matters: Last year Russia shipped 34.4 million tonnes of wheat and was projected to top 40 million tonnes this year, cementing its place as the top wheat exporter globally.
It’s pretty much like the big kid on the playground taking his toys and going home.
Egypt is one of the kids still sitting on the playground, left high and dry. As Russia’s top wheat customer, they are left searching elsewhere for the small grain. Bangladesh is in a similar position, now relying on Ukraine for its gluten fix.
On the home front: U.S. wheat prices have spiked over the winter months. The grain has been trading around $6.75, almost a full dollar higher than in early November.
Where this goes: The Russian export developments are only adding to the fear of tight global grain piles. With tighter supplies, grain buyers are left paying a premium while producers sit in a sweet spot when they have market access.