The Ukrainian government's delay in reimbursing grain exporters for value added tax (VAT) could result in lower exports in the 2009-10 season and affect next season too, according to Ukraine's grain traders union.

UZA head Volodymyr Klymenko told a news conference the debt amounted to more than UAH5.0 billion (US$628 million).

According to Ukrainian law, all exporters, who pay 20% VAT up front when they dispatch their grain, receive their rebate from the state budget fund. Any delay in repaying this money can leave exporters out of pocket.

"We have already exported 17 million tonnes of grain while our grain export could potentially reach 22 million tonnes. But the VAT debt could reduce the shipments by about 2.0 million tonnes," Klymenko said.

Ukraine harvested 46 million tonnes of grain in 2009 with local consumption of about 26 million.

The USDA estimates in the 2009-10 season, Ukraine will be the world's largest exporter of barley and the fourth-largest exporter of both corn and wheat.

"The head offices of grain trading houses have declined to issue new funds for Ukrainian branches as each new tonne of export means new debts," Klymenko said.

About 80% of Ukrainian grain exports is under control of foreign trade houses. Klymenko said unsold grain weigh on the local market in the 2010-11 season as grain supplies could rise sharply and put pressure on local prices. Analysts expect Ukraine to harvest at least 40 million tonnes of grain in 2010. "If our debts are not repaid, it means next year's harvest will stay in Ukraine," Klymenko said.