Russia Escalates War on Food Inflation With New Oilseed Export Tax

Russia widened its battle against domestic food inflation by imposing an increased export tax on sunflower seeds and oil. Russia is the largest exporter of sunflower seeds and the country’s new trade-restrictive measure will likely fuel further price gains for vegetable oils worldwide.

Reduced sunflower exports from Russia could increase pressure on supplies from Ukraine, the biggest producer of sunflower seeds and the largest exporter of sunflower seed oil. The EU also is a major producer of the products. Russia’s latest move follows its previous efforts earlier this year to control high domestic food prices, including placing restrictions on exports of grains and oilseeds. 

Overall tightness in vegetable oil supplies combined with a rebound in demand has pushed prices sharply higher from year-ago levels, including a 25% jump for soybean oil and a 10% rise for palm oil, the two most common types. Edible oils are often interchangeable, so a shortage of one type places added pressure on others. Gro highlighted these dynamics of vegetable oil markets in our recent webinar “What is the Connection Between Palm Oil, Climate, and Global Supply Chains?” which you can view on our website under the Insights tab.  

Russia’s new tax sets an export duty on sunflower seeds of 50%, up from 30% currently, with a minimum of $320/tonne. The tax will run from July 1, 2021, to August 2022. A formula-based export tax on sunflower oil will run for one year starting Sept. 1. Rapeseed exports will remain taxed at 30%.

Governments worldwide have come under pressure to combat food inflation, caused in part by soaring grain prices. Gro has created a series of real-time food inflation indices for major countries, including the US, China, and India. Russia’s latest announcement indicates inflationary pressures are still raging and other countries could yet impose additional measures to protect their domestic markets.   

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