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. Last Updated: 07/27/2016

Higher Wheat Duty Shelved

The government has shelved indefinitely plans to set a prohibitive 30 percent tariff on wheat exports designed to keep the cereal at home during the forthcoming sale of government grain stocks, market sources said Wednesday.

The proposal may be revisited depending on market reaction to a lesser tariff, due to be introduced Nov. 12.

"We still have to see the market reaction to the new tariff and the intervention sales," one of two market sources said after confirming the postponement of the higher rate.

Government officials had examined a proposal to set a tariff of 30 percent of the customs value but no less than 70 euros ($99.50) on wheat, the sources said. One source said there had also been a proposal to set a 50 percent tariff.

Economic Development and Trade Minister Elvira Nabiullina said the higher export tariff was not immediately necessary and that her ministry would watch the market before taking further action, Interfax reported.

Russia will introduce an export tariff on wheat of 10 percent or no less than 22 euros per ton, from Nov. 12. It will also introduce a barley export tariff of 30 percent but no less than 70 euros from the same date.

It will start selling grain from its 1.5 million tons of stocks to flour millers at tenders scheduled for Oct. 29 and 31.

Under Russian legislation, a tariff that can affect market interests can become effective only one month after an order setting it is signed by the prime minister and officially published in the government newspaper.

Setting a tariff earlier than that, analysts said, would be illegal.

Rising prices for basic staples could propel inflation into double-digit figures this year, which is bad news for President Vladimir Putin ahead of State Duma elections in December.

The country is trying to combat price pressures created by its oil export bonanza and rising international food prices by both economic and administrative measures.

The government has cut an import tariff on dairy products and is planning to cut an import tariff on vegetable oils or impose an export tariff on sun oil.

Prices in major European Union wheat markets fell Wednesday after Russia denied its plans for the grain export tax hike, traders said.

"The news that Russia would not increase its planned grain export tax has removed a lot of the hope this could generate rapid new export demand," a German trader said.

Paris Euronext milling wheat futures opened lower and then fell further as the reports of the Russian wheat export tax also weighed on Chicago contracts.