Appeal of Ukrainian Grain Association (UGA) to Prime Minister of Ukraine M. YA. Azarov
Ukrainian Grain Association (UGA), Kyiv, Ukraine, Wed, Aug 18, 2010 (Ukrainian)
Distributed by U.S.-Ukraine Business Council (USUBC) in English, Fri, Aug 20, 2010

SEVERE GRAIN EXPORT RESTRICTIONS WILL CAUSE DIRE CONSEQUENCES FOR UKRAINE 
Appeal of Ukrainian Grain Association (UGA) to Prime Minister of Ukraine M. YA. Azarov

Ukrainian Grain Association (UGA), Kyiv, Ukraine, Wed, Aug 18, 2010 (Ukrainian)
Distributed by U.S.-Ukraine Business Council (USUBC) in English, Fri, Aug 20, 2010

Appeal of Ukrainian Grain Association
to Prime Minister of Ukraine M. Ya. Azarov
 
Dear Mykola Yanovych,

On behalf of the Ukrainian Grain Association members I write to you with the request to draw your attention to the situation which exists in Ukraine’s grain market, and to prevent grain crisis in the country which is the breadbasket of Europe. Association members are concerned by the government plans regarding possible introduction of restrictions to grain export from Ukraine as well as the existing obstacles.

As Minister of the Agrarian Policy Mykola Prysyazhnyuk announced, the state is planning to introduce quotas for grain export totaling 2.5 million tons until the end of 2010, and it is possible that this decision is made and comes into force in the next few days.

The minister also announced the plans to additionally release 1 million tons of grain which is now located in the ports. This volume is not sufficient because of the state agencies actions, especially the State Customs, which sometimes are in direct contradiction to the law and are geared toward export blocking, e.g. introduction of additional inspections not envisaged by the law, delays in issuing certificates and permits etc.

Thus, the volume of grains which have accumulated in the ports significantly exceed those stated by the Minister, since today 1.1 million tons of grain are in the port elevators, 400 thousand tons have already been loaded on ships, and 360 thousand tons are in railroad cars. Accordingly, 1.9 million tons should be released instead of one million tons.

We also believe that the export quotas volume announced by the Minister is groundlessly low, therefore its introduction may lead to dire consequences for the market and for Ukraine in general:

          [1]  It will cause the fall of purchase prices which will negatively impact the grain producers and may cause a significant reduction in grain acreages in the next year.
          [2]  Ukrainian and international grain companies will incur multi-million losses due to violation of contract obligations, demurrage of ships in Ukrainian ports, unplanned grain storage in port elevators, and grain spoilage due to inability to store it in adequate conditions.
          [3]  In the nearest future Ukraine may loose 1.9 million tons of grain which are currently loaded on ships delayed in ports, stored in port elevators not designed for prolonged grain storage, and transported by railroad.
          [4]  In the course of the year Ukraine may loose about 8-9 million tons of grain additionally, because the certified elevator capacity will only be sufficient for storing 29.5 million tons of grain with the expected harvest of 40-40.8 million tons.
          [5]  This will drastically affect Ukraine’s reputation which will be viewed as an unreliable supplier.
          [6]  Unpredictability of state policy and non-market methods used in market regulation will significantly reduce the volume of investments in Ukraine’s agrarian sector.

This year’s grain harvest enables us to confidently state that no grain crisis threatens Ukraine. According to the forecasts of the Ministry of Agrarian Policy,

Ukraine will be able to harvest  40-40.8 million tons of grain which completely satisfies the internal needs of the country with the annual consumption at the level of 26-27 million tons. This data is also corroborated by the reports of the US Department of Agriculture according to which Ukraine is able to export over 15 million tons of grain, including 6 million tons of wheat, 4 million tons of barley, and 5 million tons of corn.

Certified elevator capacity in Ukraine is sufficient to store only 29.5 million tons of grain. To date only 1.2 million tons of grain has been exported, and an urgent question of storing the rest of grain amounting to 8-9 million tons will arise.

We would also like to draw your attention to the fact that introduction of grain export restrictions directly contradicts obligations which Ukraine took upon itself when it became a WTO member. Such actions may cause significant decline in Ukraine’s international reputation.

Ukrainian Grain Association on behalf of all its members requests that you do not introduce any grain export restrictions until September 15 and remove all existing informal restrictions and obstacles which make conduct of export operations impossible so that the exporter companies are able to at least release the grain which is currently in railroad cars, in port elevators, and on board of ships.

We request that you use the same quota distribution mechanism which was developed in 2006-2007 through joint efforts of Ukrainian Grain Association, the Ministry of Economy, and the Ministry of Agrarian Policy. The use of this mechanism would hasten the quota distribution process among the companies and satisfy both the state needs and the market players’ needs. We’d like to stress that last time over one month of hard work was spent on development thereof.

We also request once again that the quota sizes be revisited since the limits announced by the Minister of Agrarian Policy Mykola Prysyazhnyuk are groundlessly low and introduction thereof would lead to oversaturation of the internal market, lowering prices and farmers going bankrupt, as well as spoilage of almost 8-9 million tons of grain. 
 
LINK: http://uga-port.org.ua/novosti/ukraina/zvernennya-ukra-nsko-zernovo-asots-ats-do-prem-r-m-n-stra-ukra-ni-azarova-m-ya

USUBC NOTE:  Many of the agricultural commodity exporters who are members of the Ukrainian Grain Association (UGA) are also members of the U.S.-Ukraine Business Council (USUBC), www.usubc.org.  Agribusinesses in Ukraine who handle large quantities of agricultural commodities for export who are members of the U.S.-Ukraine Business Council (USUBC) include ADM; Bunge; Cargill; CHS Ukraine; Dreyfus Commodities; Toepfer; and WJ Grain/Polygrain.