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  • What are the expected volumes of grain export from Ukraine?

    13.08.2010

    Harvesting was hampered by extreme  weather conditions in the Black Sea Region this year. Grain production in Russia will most likely not exceed consumption. Total grain production in 2010/11 MY is forecast by the Russian Government at about 60 to 65 million t (87 million t in 2009/10 MY). Therefore, the Russian Government blocked all grain exports until the end of this year by an official export ban. Grain production in Ukraine will also be lower. The Ministry of Agrarian Policy of Ukraine lowered its harvest forecast to about 40 million t in 2010/11 MY (47 million t in 2009/10 MY). Total grain consumption in Ukraine is about 26 million t of food and feed grains. With minor public stocks theoretical exports would be about 14 to 15 million t of grains. The Russian export ban might be qualified as force majeure for existing contracts to relieve exporters from contractual obligations. This is especially important in a situation with booming prices where supply contracts have been negotiated at lower prices in the past but have to be realized at higher current prices.

    Ukrainian grain exports although being officially open are actually and effectively blocked by additional prolonged quality checks and customs procedures in particular for wheat. As a consequence exporters stopped actually purchasing wheat on the domestic market. This will allow the Ukrainian public intervention board during the next months to buy wheat at lower domestic prices compared to booming world markets for grain. The de-facto export ban for wheat leads to breaches of existing export agreements and shipment dates. Grain traders are very much concerned about the lack of transparency and additional checks of shipments by state inspection leading to accusations that some traders did not correctly notified grain quality classes to fake VAT refunding claims. Traders are asking the Government to either allow exports or to officially ban exports similar to Russia to get out of existing supply contracts for obvious reasons.

    The Government policy is aiming to secure food security and to allow the public intervention fund to purchase grains, in particular wheat, at lower domestic prices. Food security is a legitimate policy goal. However, whether the current confusing policy measures lead to the expected results is highly questionable. The losses for agricultural producers are huge taking into consideration the price differences between domestic and world grain markets. The policy is also damaging the investment climate and the reputation of Ukraine as a reliable international partner. It would be better to develop an alternative food security strategy.

    Authors:  Strubenhoff Heinz-Wilhelm, Куценко Катерина
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