September 3, 2010

Ukraine's grain market goes stagnant

The postponement in the consideration of Ukraine's grain export quota issue has resulted in a reduction of grain purchases by grain traders.

The Cabinet of Ministers last postponed the settlement of this problem until September 15 that made the market go "into hibernation." "I think that the state should give a clear signal-whether grain export quotas will be introduced or not. In my opinion, it's better to introduce the quota mechanism similar to that in 2006. Then it would be clear for grain traders who sells products, and how much. This would step up grain purchases from farmers who need working capital for the autumn sowing campaign," said Serhiy Stoyanov, the director general of the Ukrainian Agrarian Confederation.

The confederation's analysts believe that grain supplies will be limited until the state accumulates the necessary reserve of grain in order to close the country's needs for grain. Given the pace of grain procurement for the state reserve, the authorities will need at least two or three more months, because only 1.4 million tonnes of grain, out of the required 4.5 million tonnes, was sent to the reserve.

In July-August, the first two months of the current marketing year, Ukraine sold only 2.2 million tonnes of grain that corresponds to the minimum amount of grain supplies. The potential of grain traders allows them to export up to 2.5 million tonnes of grain per month. This means that earned no more than US$300 million on foreign markets in July and August, but this amount could be 1.5 times higher, given the August rise in prices for agricultural products caused by the ban on grain exports in Russia.

With reference to the Ukrainian Agrarian Confederation, it is also projected that the supplies of Ukrainian grain to foreign markets in the 2010/2011 marketing year will fall by 29% to 15 million tonnes.