May 10, 2012

 

Sino-Ukrainian quarantine deal talks may start soon

 

 

Talks for a quarantine contract between China and Ukraine, which will enable Ukraine's corn to enter the Chinese market, may be held during the visit of the Ukrainian finance minister to China, which is likely within two months.

 

The two governments are still working on the schedule for the visit of Yuriy Kolobov, said Oleg Bakhmatyuk, chairman of the board of Ukrlandfarming Plc, the largest Ukrainian agro-industrial company, who is also a member of the accompanying delegation.

 

He also said there is hope that the two sides could sign the agreement, "given their common interests", referring to Ukraine's need to enter the Chinese market and China's growing demand for corn as animal fodder in the booming livestock industry.

 

Ukrlandfarming Plc owns the largest land bank in Ukraine, totalling almost 500,000 hectares, and it has a storage capacity of more than one million tonnes.

 

In 2010, it produced about 3% of Ukraine's grain and 8.6% of its sugar.

 

The company is working with the Singapore-based Wilmar International Ltd, a major agribusiness group in Asia, to accomplish the first shipment of 50,000 tonnes of Ukrainian corn and wheat to China.

 

But that shipment can't take place without a bilateral quarantine agreement, said George Kikvadze, the company's chief investment officer.

 

It is also in talks to buy Ukrainian corn with the State-owned conglomerate China National Cereals, Oils and Foodstuffs Corp, which holds a large portion of the nation's corn import quota and has so far mainly imported US corn.

 

"Cooperation with COFCO is only a matter of time," Kikvadze said.

 

China's corn imports have risen steadily in recent years. During the first quarter of this year, imports stood at 1.74 million tonnes, equivalent to the total import amount of 2011, according to the Ministry of Agriculture.

 

Industry analysts estimate this year's imports at between three million and four million tonnes. Most of China's current corn imports come from the United States.

 

Analysts said corn from Ukraine could help reduce China's reliance on the US, and it may prove popular in the Chinese market given its lower price and the fact that it is not genetically modified.

 

But there are other factors. As agricultural trade plays an increasingly important role in balancing China-US trade, "large State-owned companies are likely to stick to corn from the US because of political reasons", said Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant Ltd.

 

The Ukrainian company looks forward to exporting other farm products to China.

 

Last month, it signed agreement on projects totalling more than US$4 billion with China National Machinery Industry Corp to boost the production capacity of pork and chicken and improve storage facilities and logistics infrastructure. The company expects to export all the added production to China.