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Wheat Slumps Despite Russia Raising, Extending Export Tax

Wheat futures are retreating from their best levels in nearly seven years in the middle of the trading week. The agricultural commodity slumped, despite the Russian government announcing that it plans to raise its export tax on wheat for a second time. This is significant news for the grains market since Russia is one of the leading suppliers of wheat, and US output is forecast to tighten in the coming months. Can wheat soon test the $7 mark?

March wheat futures tumbled $0.0425, or 0.63%, to $6.68 per bushel at 14:18 GMT on Wednesday on the Chicago Board of Trade (CBoT). Wheat prices have been roaring out of the gate, rallying more than 4% in the first few weeks of the calendar year.

Moscow has been driving the wheat market in recent sessions. The Ministry of Agriculture recently stated it would raise and extend a tax on wheat imports to curb the spike in domestic prices. However, market observers warn that this will impact both importers and consumers, especially since it will add to food inflation in neighboring economies that are still reeling from the coronavirus pandemic.

The economy minister said that the government would impose a wheat export penalty of 50 euros per ton as of March 1. Officials had initially proposed a 25-euro levy effective February 15. There were also discussions that Russia would implement a 45-euro tax.

Commodity markets are skeptical that this will yield any benefit for Russian consumers. The first export tax that was formally adopted last month failed to lower national prices.

With a major producer curtailing supply in the broader wheat market, this could allow prices to test $7. The US Department of Agriculture (USDA) recently slashed forecasts of US corn, wheat, and soybean inventories, tightening stocks in the global marketplace.

In other agricultural commodities, March soybean futures slumped $0.2075, or 1.5%, to $13.65 per bushel March corn futures fell $0.0925, or 1.76%, to $5.1675 per pound. March coffee futures declined $0.0105, or 0.83%, to $1.261 a pound.

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