Russia Eyes Lifting Grain Import Duties

Russia is likely to suspend duties on grain imports by the end of March, lifting the import tariff until the summer as domestic wheat prices hit record levels following last year's poor harvest.

Although the country imports grains free from import tariffs from Kazakhstan, Moscow last imported large amounts of wheat from the west in the crop season of 1999-2000, when it bought almost 1m tonnes from the US.

Arkady Dvorkovich, deputy prime minister, said on Monday that a decision on import duties would be taken by the end of the first quarter.

He "expected"the import duties to be lifted but said the final decision rested with the Eurasian Customs Union between Russia, Kazakhstan and Belarus, which was set up in 2010.

In the international grain markets, the European milling wheat contract's premium to the CBOT wheat traded in Chicago rose 12 per cent on the Russian news, although expectations of favourable weather conditions in the US and a better harvest weighed on both wheat contracts.

The adverse weather last year hit Russian wheat production, which fell by a third in 2012 from the year before, falling from 56.2m tonnes to 37.7m.

Domestic prices have surged as a result. Local feeding wheat prices, for example, have almost doubled from the start of June 2012 to 11,675 roubles, or $387 a tonne. This has forced the government to release strategic reserves to try and relieve the upward pressure on the internal market.

Many analysts expect Russia to import 1m to 2.5m tonnes of wheat, but Nick Higgins, analyst at Rabobank in London, said the number could be higher.

"It's got potential to be quite significant,"he said, adding that Russia could import up to 3m tonnes of wheat from the US, especially with import prices at the St Petersburg trading hub currently at high levels to make the sums work.

Moscow's talks with the other two customs union members over lifting the import duty may face hurdles as Kazakhstan is a leading exporter of wheat to Russia.

The union will decide how long the tariff suspension would stay in place.
While Russia's agricultural ministry wants import duties to be reimposed on July 1, the economy ministry has advocated keeping the suspension in place longer, and bringing back import duties only on August 1.