February 10, 2004
Ukraine To Import 680,000 MT Wheat
With rapidly diminishing wheat supplies from Kazakhstan and a Russian export duty in place, Ukraine will be looking elsewhere to import an estimated 680,000 MT of wheat during the remainder of this marketing year. Wheat from the United States, Canada, European Union and Argentina will soon be competitive as domestic grain elevator prices within Ukraine are anticipated to increase further from the current price of $254 per MT (EXW, milling quality wheat).
The State Statistics Committee of Ukraine has announced that 2003 grain and pulse production (wheat, barley, corn, rye, oats, buckwheat, millet, rice, peas and beans) declined 48% over the previous year to 20.2 million MT harvested from 11.1 million hectares. Wheat, barley and rye production estimates for 2003 were reduced to reflect lower reported harvested areas. Estimates for corn and oat production were raised, reflecting higher yields, the attache said.
Ukraine's 2002 grain production estimate was adjusted to correspond with the final numbers published by the SSCU in the 2002 Agricultural Statistics Yearbook.
Trade and Trade Policy
Kazakhstan is expected to remain the main wheat supplier to Ukraine in February-June 2004 despite its diminishing stocks and reported export restrictions. So far, Kazakh exporters continue to successfully receive export permits for shipments to Ukraine.
Russian wheat is unlikely to enter Ukraine in the coming months. The Russian export duty on wheat, implemented in mid-January 2004, has effectively stopped exports to Ukraine. As available wheat stocks diminish in Kazakhstan, Ukrainian wheat importers will eventually be required to turn to higher-priced wheat from the United States, Canada, European Union and Argentina.
The likelihood of additional rye imports into Ukraine is low as there are no available rye stocks in Belarus or Kazakhstan. Ukrainian importers are not prepared to pay high prices for EU rye and have indicated that, as they are currently available at comparable prices, they would prefer to import EU wheat rather than rye.
Continuing Saga with VAT
As of Jan. 1, 2004, a provision of the State Budget of Ukraine prohibited wheat importers from utilizing promissory notes to pay the value-added tax (VAT) on imported grain. This new twist in the VAT saga reverses the policy established in October 2002 (GAIN Report #UP3010), whereby the GOU had allowed importers of wheat to either utilize promissory notes to delay payment of the VAT on imported grain for up to 180 days or importers could offset the VAT on imported grain with outstanding VAT export refunds due but still unpaid by the GOU from previous years. Traders report that while they are currently required to pay the 20% VAT prior to customs clearance, this new measure is not expected to restrict imports significantly, the report said.
This new provision in the GOU's State Budget also prohibits VAT refunds to food and agricultural exporters. The Cabinet of Ministers of Ukraine has announced that the GOU will soon repeal this provision. Once VAT refunds are officially reinstated, exports of barley and corn are expected to resume uninterrupted for the remainder of MY 2003/2004.