Ukraine's state-run Agrarian Fund must buy up to six million tonnes of grain from farmers this year so as to prevent sharp swings in domestic grain prices, according to Ukraine's Farm Ministry.

The fund bought about 1.5 million tonnes of grain in 2009.

The ministry said in a statement the government had allocated UAH3.4 billion (US$430 million) to buy grain for stocks and planned to give the fund an additional UAH5.0 billion (US$632 million) in the near future.

It also said the fund had to become an intermediary between farmers and traders, who it said should focus on exports.

Earlier this year, Deputy Prime Minister Viktor Slauta said the government would set up a state-run grain trader to compete with private firms on the export market and that the Agrarian Fund as well as state grain firm, Khlib Ukrainy could join the new body.

Slauta said the new state body must be able to buy up to two million tonnes of grain on the local market for exports and this would lead to an acceptable price.

Ukraine exported 21.1 million tonnes of grain in the 2009/10 season, which runs from July to June. In 2008/09 the exports reached 25 million tonnes. The country plans to harvest 45.5 million tonnes of grain in 2010 compared with 46 million in 2009.