August 19, 2010

Ukrainian Grain Association urges government to review grain export quota

The Ukrainian Grain Association (UGA) believes that the grain export quota of 2.5 million tonnes proposed by the Agriculture Ministry is "unjustifiably low," and has asked the government to lift all current informal restrictions on exports.

In a statement to Ukrainian Prime Minister Mykola Azarov, the Ukrainian Grain Association is asking not to impose restrictions until September 15 and increase the size of export quotas. In their opinion, the "unjustifiably low" size of quota could lead to negative consequences for the market and Ukraine.

Market players predicted that grain procurement prices could fall, which would have a negative effect on producers and could cause a significant reduction in the volume of grain crops next year.

In addition, Ukrainian and international grain companies will incur multimillion hryvnia losses due to the disruption of contractual obligations, idle chartered ships in Ukrainian ports, the unplanned storage of grain at port elevators and deterioration of grain.

The association calculated that the loss of grain at port elevators not suited for long-term storage could reach up to 1.9 million tonnes, and during the year, Ukraine could lose about 8-9 million tonnes of grain due to the insufficient capacity of certified grain elevators.

According to the association, the amount of grain accumulated at ports significantly exceeds the amount declared by the Agriculture Ministry, with 1.1 million tonnes of grain currently stored at port elevators, 400,000 tonnes already loaded on ships and 360,000 tonnes in rail cars. Therefore, it is necessary to export 1.9 million tonnes instead of one million tonnes.

The Economy Ministry on August 18 issued a draft government resolution on the approval of quotas on certain types of agricultural products the export of which is subject to licensing by December 31, 2010, and the license issuance mechanism.

The document proposes setting the quota on exports of wheat and a mixture of wheat and rye (meslin), and emmer wheat at 1.5 million tonnes, barley at one million tonnes, and rye at 10,000 tonnes.

The government is planning to consider the imposition of quotas on grain exports at a meeting on August 25.