September 9, 2010

Ukraine's grain export ban politically motivated

Despite a drop in local wheat prices in recent weeks, Ukraine's government has imposed a de-facto ban on grain exports in a bid to win voters ahead of October elections, according to a Ukrainian grain analyst.

Nikolay Yu Vernitsky, director of ProAgro said Ukraine's government had introduced informal measures to block grain exports in a bid to keep food prices low before regional elections next month. "There is still no agricultural policy balance between the interests of agricultural producers and consumers here in Ukraine," he said.

"Now high consumer prices are more terrible for the government than the ability for farmers to free-sell their production. We will have regional authority election October 31, and support of price stability is too important an issue both for central and local authorities," he elaborated.

Domestic prices for milling wheat have fallen 6.25% in the past week to UAH1,500 (US$189) a tonne at the farm gate, down from a peak of UAH1,800 (US$227) a tonne a month ago, he said.

Vernitsky attributed the fall in prices to an informal ban on grain exports enforced by the country's state customs in recent weeks. The Ukrainian Grain Association Tuesday (Sep 9) said more than 20 ships carrying 380,000 tonnes of grain were being held in Ukraine's ports.

"The main factor moving domestic prices up is world prices. That's why domestic prices were increasing in previous months. But now connection with world prices is mostly lost, exporters stopped new grain buying, and grain prices declined," he said.

Global wheat prices have surged more than 60% in recent weeks due to fears of shrinking supplies after severe drought in the Black Sea slashed harvest expectations of regional producers.