VAT delays give Ukraine's grain traders a headache

Ukraine's domestic grain prices could fall 10-20% in the near future as many major exporters have stopped local purchases due to delayed value-added tax (VAT) refunds.

Ukraine plans to harvest 48 million tonnes of grain in 2009, with local consumption seen at 26-27 million tonnes and exports at about 20 million tonnes. Traditionally, foreign trade houses dominate Ukraine's grain export market.

A number of leading traders have stopped buying grain at inland elevators, UkrAgroConsult agriculture consultancy said.

The coming festive season may be one reason for the drop in grain purchases, but another serious reason for the lower market activity could be the Ukrainian government's statement that money owed to traders to export VAT refunds amounts to $2.4 billion, said the consultancy.

Huge debts arising from delayed VAT refunds to traders could dent Ukrainian Agrarian Confederation's projections of high grain exports in the 2009-10 season.

From September to November, Ukraine exported 7.53 million tonnes of grain.