International wheat markets rocketed higher last week as news surfaced that Russia is considering the introduction of an export tax to cool overheated domestic wheat prices. Up until early last week, global wheat prices had been softening after a series of production increases in Australia and Canada. Australian wheat prices were under the pump as exporters struggled to digest the larger than expected national harvest, which is tipped to be around 34 million tonnes. Market bears turned to raging bull after Vladimir Putin criticised officials saying wheat prices were too high and rising flour and cooking oil prices were hurting incomes. Soon after, Russia's prime minister said he would take action to cool the near record high internal wheat and flour prices. Russian insiders are saying the government is considering implementing a $33 plus export tax to slow wheat exports and soften internal wheat prices. The expected export tax would be implemented after February 15 although the price impact has been immediate. United States wheat futures soared on the news, finishing the week 6-7 per cent higher, the largest weekly gain in nearly three months.
Global importers have moved to cover second quarter demand on the speculation of the Russian export tax. Russia is forecast to account for more than a fifth of global trade in the 2020/21 season, and a restriction of these supplies would be supportive world wheat prices until the fate of the 2021 winter wheat harvest becomes clearer. Even a small export quota would push exports to other origins, including the EU, Canada, United States and Australia and put upward pressure on global wheat prices. WA wheat prices were sharply higher on Friday as buyers responded to news of the possible Russian tax. East coast markets were more subdued with buyers waiting for a strengthening in the exporter bids. Australian crop expectations continue to climb with WA, SA and GrainCorp still recording strong grain deliveries. The tail is wagging on WA's grain harvest, which has come in considerably better than expected despite the below average in crop rainfall. CBH has received 12.75 million tonnes of grain deliveries as of Friday with final deliveries expected to nudge 15mt. WA's wheat crop is expected to be close to 9mt.