Wheat Jumps as Top Shipper Russia Surprises With Export Tax Hike

(Bloomberg) -- Wheat rose to a six-year high in Chicago after Russia said its new wheat-export tax will rise even more than expected a few weeks after kicking in, as the country accelerates efforts to cool domestic food prices.

Russia, the biggest wheat exporter, is adding to measures announced late last year after President Vladimir Putin told the government to cool food-price inflation because of sharp increases for staples like bread and sunflower oil. A grain-export quota and wheat-export tax that will both kick in Feb. 15 have combined with tightening supply elsewhere and surging Chinese demand to drive global grains prices to multiyear highs.

Read more: Russia Roils Markets on Putin’s Push to Curb Food Prices

Russia’s wheat duty will rise to 50 euros a ton ($61) from 25 euros on March 1, the Economy and Trade Ministry said in a statement. The government is also planning to continue taxing shipments into the next season. The agriculture ministry earlier this week proposed an increase to 45 euros from March 15.

The measures could curb sales from the world’s largest wheat shipper. Benchmark Chicago wheat futures rallied as much as 2.5% after the news to the highest since May 2014.

Argentina, another major crop exporter, caused similar disruptions in the corn market with a brief suspension on exports late last year, before the government backtracked on the measure.

The protectionist moves have compounded declining global harvests and a spike in Chinese demand that buoyed the Bloomberg Grains Spot Subindex more than 60% since early August. Russia’s previously-announced tax did little to calm domestic markets and has largely been passed on Black Sea export prices, boosting all global origins, consultant Strategie Grains said in a note.