When wheat prices rise export duty talk increases

Wheat is a international crop with some countries using their exports as mechanism for imposing domestic economic policies and a source for revenue. The talk this week has been about new duties on Russian wheat.

When prices increase on world markets, there should be a greater movement to export from wheat producing countries which will reduce domestic supplies and increase local prices. This increase in exports to offset global demand will affect consumer prices in Russia and retard domestic meat production. The view from many market observers is that an increase in world prices will naturally lead to some duty regulation by the Russian government.

The discount price gap of Russian wheat to US and French has declined as the market has tightened. The impact of potential for duties will be an increase in demand today to prepare for potential higher prices. The wheat market becomes more exaggerated.