August 12, 2010

Ukraine considers quota on grain exports

Concerned about a potential food grain shortage at home, the Ukrainian government is considering curbing grain exports, although a final decision would be made next week.

The grain harvest in Ukraine is likely to fall 13% to 40-42 million tonnes this year from last, after severe winter frosts and a scorching summer heat wave. It needs more than half of that total for itself.

Although the quotas are likely to be small, the announcement could affect grain markets already jittery after Russia, stricken by the worst drought in 130 years, announced an export ban, helping global wheat prices soar to two-year highs. Prices have since retreated, but remain volatile.

"If quotas are imposed it would be on wheat," Agriculture Minister Mykola Prysyazhnyuk told a news conference, but later said corn and other cereals could also be subject to restrictions. "The first quota proposal could be 7-8 million tonnes. This is for all grains. The final volume of quotas could be after corn harvesting," he said. Ukraine is among the world's top five exporters of corn.

Local analysts said the export quotas, rather than an outright ban, could help to bring some calm to the market.

"It (quotas) seems to be an acceptable decision. It could partially calm the market and gives traders clarity," said Mykola Vernitsky from ProAgro consultancy.

Ukraine introduced grain export quotas in the 2007/08 season after a smaller harvest.

Some traders said it was likely that only milling wheat would be subject to restrictions. "There is no reason to limit feed grain exports. We have a significant surplus of feed grain and any limit will hit farmers as they will not be able to sell grain at a good price," a Ukrainian trader said.