Ukraine to set up grain trading body

The new Ukrainian government will set up a state-run grain trader aimed to buy up to two million tonnes of grain and to compete with private firms in the lucrative export market, promising farmers tolerable prices, Ukraine's Deputy Prime Minister said on Wednesday (Apr 14).

The government said private firms, which dominated the market, had dictated the farmers' unprofitable prices. "We will set up a state trader, which will soon take place, to create an alternative to private companies that buy and export from Ukraine," Viktor Slauta said. "At the moment, farmers have no other buyers except private traders.

Ukraine exported 25 million tonnes of grain in the 2008/09 season and plans to sell up to 22 million tonnes abroad in 2009/10. But farmers have repeatedly said they have had to sell their grain to exporters at too low a price.

However, traders said a new state trader is hopeless as its heavy bureaucratic structure and non-market principles could not compete with adaptable and experienced private grain houses.

"This state trader will be like a blind kitten," said Serhiy Stoyanov, president of Ukrainian traders' union UAC. "If the government needs to sell some grain, it has to announce a tender and the winner will export."

Slauta said Ukraine, which consumes nearly half of its grain production, has to take measures to increase exports in the last three months of this season to avoid large grain stocks and future domestic prices fall.

He said the government planned to resolve the problem of delays next week in reimbursing exporters for VAT, which were threatening to reduce shipments. "I fear a possible rise of our grain stocks. But if we pay off the VAT debts, traders might increase exports that could rise up to 22 million tonnes," Slauta said.

Traders, however, forecast that exports will gradually fall from 700,000 to 500,000 tonnes from March until June, the last month of the 2009/10 season.