October 19, 2012

 

Ukraine increases wheat exports to avoid grain market collapse

 

 

In order to save the country's grain market from collapse and keep the wheat prices high, the Ukrainian government has decided to increase wheat exports by a quarter.

 

According to the Ukrainian edition of Russian business daily newspaper Kommersant on October 12, Ukraine will export 25% more wheat than planned in this marketing year.

 

Agrarian Policy and Food Minister Mykola Prysyazhnyuk said that the ministry had decided to increase the volume of wheat exports to five million tonnes. According to experts, the decision will contribute to keeping the wheat prices high. The Agrarian Policy and Food Ministry decided to increase the approximate volume of wheat exports to five million tonnes in the 2012-13 marketing year (from July to June), Prysyazhnyuk said.

 

"The decision will be formalised in written form on October 15-16," he told Kommersant. He referred to the supplement to the memorandum which the Agrarian Policy and Food Ministry and the participants in the grain market have been signing since 2011 and which stipulates the conditions of grain exports, which ensure the country's food security.

 

According to the document signed in September, Ukraine committed itself to supplying foreign markets with four million tonnes of wheat, 12.4 million tonnes of corn and three million tonnes of barley. A high-ranking source in the Agrarian Policy and Food Ministry explained to Kommersant that the decision to increase wheat exports is related to the grain balance of the current and next marketing years.

 

"In September we did not realise how the sowing of winter crops would develop in the southern regions, which had been badly hit by the drought. How much of the almost 900,000 tonnes of grain, which the Agrarian Fund bought under futures contracts, will actually be supplied to silos," the source told Kommersant.

 

According to the Agricultural Fund, as of the beginning of October, over 600 million tonnes of grain were received from farmers under futures contracts in addition to 1.2 million tonnes in the Agricultural Fund's reserve. The area under winter crops increased by 5%, reaching 6.7 million hectares as of October 10.

 

The chairman of the Ukrainian grain association, Volodymyr Klymenko, said that the wheat balance in Ukraine allows exporting up to six million tonnes without endangering food security. "The country will have 58 million tonnes if we take into account the grain harvest of 45.3 million tonnes forecast by the ministry and last year's surplus. Ukraine consumes 27 million tonnes of grain. Thus, it is possible to export up to 25 million tonnes of all sorts of grain, and not 19 million tonnes as stipulated in the memorandum," he said.

 

Grain traders reckon that the Agrarian Policy and Food Ministry deliberately decreased the volume of exports. "The memorandum stipulates that the government may impose restrictions once 80% of grain registered for export leaves Ukraine. This means additional earnings for the civil servants who will decide who should be allowed to export and who should not," the top manager of one of the biggest Ukrainian grain exporters said.

 

The head of the agricultural union of Ukraine, Hennadiy Novikov, believes that the Agrarian Policy and Food Ministry's decision will contribute to keeping the wheat prices high in Ukraine. "The traders stopped buying wheat given the fact that so far exports have amounted to 3.1 million tonnes of wheat, which is the highest amount possible, after which restrictions may be imposed. Had not the Agrarian Policy and Food Ministry increased the volume of exports, the market would have collapsed. Now the farmers can receive a fair price for their wheat," said the top manager of one of the biggest grain traders, who asked for anonymity.