October 19, 2010

 

Ukraine's exporters cancel wheat orders on grain quotas

Ukrainian grain traders are cancelling wheat export orders for several thousand tonnes each due to the government's decision to limit exports to 500,000 tonnes for the rest of 2010, trading executives said Tuesday (Oct 19).

 

Unlike Russia, which has banned wheat exports but had limited exposure to the Asian market, Ukraine is a major supplier to countries such as South Korea, the Philippines, Indonesia, Vietnam and Bangladesh.

 

Ukraine has a potential to export 500,000 tonnes in 10-30 days. The said countries are now turning to central Europe, Australia and the US for their wheat needs.

 

Since August, shipments have been getting postponed from one month to another due to delays in clearances at ports, but with the announcement of the new quota system, suppliers are now cancelling contracts, said a Singapore-based executive at a global trading company.

 

Exporters in Ukraine confirmed that they were cancelling contracts; some said they plan to declare force majeure due to the government's quota restrictions.

 

Pending export orders total more than 500,000 tonnes, and there is still uncertainty over the allocation of export quotas as dozens of companies are involved, so many companies have no option except to declare force majeure, said an exporter based in Ukraine's port of Odessa.

 

Another trader in Odessa said that under international rules, fixing grain export quotas wasn't tantamount to a ban on shipments and doesn't necessarily qualify for force majeure, but exporters are still cancelling contracts because the volume committed exceeds the aggregate quota.

 

Traders in Ukraine said getting customs clearances for exports was very slow; in one case clearance was withdrawn over procedural issues even after containers had been loaded.

 

Global trading companies dealing in Ukrainian wheat are now saddled with hundreds of thousand tonnes of wheat they purchased from growers ahead of an expected bumper harvest in June, unable to export due to the government's curbs.

 

The country will likely have a surplus of close to six million tonnes in the marketing year ending June 30, 2011 but the government doesn't want to take a risk with supply and prices due to uncertainty over the next crop. Adverse weather affected the crop this year just as harvesting began in June.

 

Ukraine reaped a record harvest of around 26 million tonnes in the marketing year ended June 30, 2009 and exported 13 million tonnes, according to USDA estimates. Last year, production and exports were 21 million tonnes and nine million tonnes.

 

This year's harvest is almost complete and production is close to 18 million tonnes; the domestic requirement is 12 million tonnes. According to government estimates, until last week Ukraine had exported around 1.9 million tonnes in the current marketing year that began in July.

 

Traders said Ukraine exported around 600,000 tonnes in September, down from 1.8 million tonnes a year earlier.