July 22, 2010

An anticipated decrease in Ukraine's grain production in 2010 will not lead to export restrictions, but analysts forecast a sharp decrease in shipments of wheat and barley.

Agriculture Minister Mykola Prysyazhnyuk said any limits would damage Ukraine's image as the world's leading grain exporter and that the government would try to fill demand in the domestic market by making large state purchases.

"We will not impose export restrictions," Prysyazhnyuk told reporters. "Taking into account that local prices are rising, we will propose to increase our purchase prices."

Severe winter frosts followed by record high summer heat have destroyed crops on some 700,000 hectares sown with barley and wheat. They said wheat yields were likely to fall to 2.89 tonnes per hectare in 2010 from 3.15 tonnes in 2009.

UkrAgroConsult, an agriculture consultancy, has said the wheat crop could fall to 18.65 million tonnes from 19.13 million in 2009 and that poor weather cut the share of milling wheat to 25-30% this year from about 40-45% in 2009.

According to the consultancy's calculations, the milling wheat harvest could total about six million tonnes in 2010, which is just about as much as Ukraine consumes domestically. The absence of a milling wheat surplus this year has triggered market speculation the government could impose export restrictions this season.

Ukraine restricted grain exports in the 2007/08 season when its wheat output dropped to 13.7 million tonnes after ice killed crops on more than a million hectares. The government said at the time the limits would ensure the population had enough bread.

This time, Prysyazhnyuk said, the government planned to buy up to five million tonnes of grain in stocks to prevent any food shortage in 2010/11. Ukraine had in stocks 4.9 million tonnes of grain, including 2.5 million of wheat, as of July 1.