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European wheat prices hold firm as Russia hikes excise duties

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Vladimir Putin

Vladimir Putin

REUTERS

Vladimir Putin

Fears that excise duties introduced by Russia could hit Black Sea supplies of wheat this year is continuing to underpin prices for wheat on European markets.

In Paris this week wheat was trading for up to €198/t and the market continued to hold firm at these price levels.

British wheat prices however have eased over the last few days, with values varying between £131-132/t (€167-169/t).

The weaker sentiment in British grain markets has been blamed on fluctuations in the value of sterling against the euro and dollar which is linked to fears regarding Britain's long-term commitment to EU membership.

However, wheat markets in Britain have strengthened steadily since October when prices fell to £100/t or €128/t for the first time in four years.

Reports in the British media at the time reported that prices in the UK had breached "a key psychological barrier".

The fall-off in British wheat stocks at the time were blamed on excellent harvests in both Britain and across mainland Europe.

Analysis group Stratégie Grains put British surplus wheat stocks ending 2014-15 at 3.6m tonnes, British news service Agrimoney.com.

This represents greater reserve stocks than Britain has seen since the days of Intervention stores.

"About 1.7m tonnes of that is surplus wheat over and above the usual carryover stocks," Stratégie Grains stated.

Meanwhile, the Russian excise tax will equate to 15pc of a shipment's total value, plus €7.50/t. The charge will reduce exports by at least 6.5pc for the season ending June 30. It is estimated that the tax will amount to at least €35/t.

Russia, the world's fourth-biggest wheat exporter, is adding restrictions to international grain shipments to cope with a currency crisis that has raised food prices for domestic consumers. The move follows similar export duties in 2008 and 2004.

In 2010, Russia banned companies from shipping wheat overseas amid the worst drought in a half-century, leading to a 47pc lift in Chicago prices that year. However, analysts have insisted that a similar surge in prices will not occur on this occasion.

The decision to introduce the tax has been prompted by the continuing trade war between the west and Russia over the latter's annexation of the Ukrainian region of the Crimea and its alleged support for Russian separatists in the east of Ukraine.

Food and fuel are the real battlegrounds in the trade war, with the west and its Middle Eastern allies ramping up oil production to undermine Russian income from its vast energy reserves. Meanwhile, Vladimir Putin's regime retaliated by banning food imports from the EU and US.

However, the rouble fell in value by 46pc against the dollar last year as a consequence of the trade dispute. Brent fell to $55.51 per barrel in London yesterday, the lowest level since May 2009.

Additional reporting Bloomberg

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