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 "The U.S.-Ukraine Business Council (USUBC) congratulates the government of Ukraine for not imposing grain export quotas today. This very positive decision in Kyiv was critical and should allow Ukraine's grain markets to return to normal and get the flow of grain moving again. Ukraine's farmers and agribusiness should be allowed to do business without constant government interference. Everyone, including the government, will gain from the strong market price for grain if private markets are allowed to work. The action today by the government was a win-win-win decision."
U.S.-Ukraine Business Council (USUBC)
Wash, D.C., Wed, August 25, 2010
WEDNESDAY, AUGUST 25, 2010
UKRAINE BUSINESS NEWS - SIX ARTICLES
"The U.S.-Ukraine Business Council (USUBC) congratulates the government of Ukraine for not imposing grain export quotas today. This very positive decision in Kyiv was critical and should allow Ukraine's grain markets to return to normal and get the flow of grain moving again. Ukraine's farmers and agribusiness should be allowed to do business without constant government interference. Everyone, including the government, will gain from the strong market price for grain if private markets are allowed to work. The action today by the government was a win-win-win decision."
INDEX OF ARTICLES ------
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1. UKRAINE PUTS OFF DECISION ON QUOTAS FOR GRAIN EXPORTS
By Daryna Krasnolutska, Bloomberg, NY, NY, Wed, Aug 25, 2010
2. UKRAINE SEES NO IMMEDIATE NEED FOR GRAIN EXPORT QUOTAS
Reuters, Kyiv, Ukraine, Kiev, Ukraine, Wed Aug 25, 2010
3. SIGNIFICANT DROP IN VOLUME OF GRAIN EXPORTS FROM UKRAINE
2.4 times more grain was exported in 2009 vs same time period in 2010
UkrInform - Economic News online, Kyiv, Ukraine, Aug 25, 2010
4. 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
5. GRAIN AND FEED TRADE ASSOCIATION (GAFTA) RAISES CONCERN OVER UKRAINE TRADE BARRIER
Grain and Feed Trade Association (GAFTA), London, UK, Wed, August 18, 2010
6. GRAIN EXPORT RESTRICTIONS IN UKRAINE - THE NEED FOR TRANSPARENT MEASURES
Statement by American Chamber of Commerce in Ukraine (Chamber) & the U.S.-Business Council (USUBC)
American Chamber of Commerce in Ukraine (Chamber), Kyiv, Ukraine
U.S.-Ukraine Business Council (USUBC), Washington, D.C.
Kyiv, Ukraine, Thursday, August 19, 2010
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1. UKRAINE PUTS OFF DECISION ON QUOTAS FOR GRAIN EXPORTS
By Daryna Krasnolutska, Bloomberg, NY, NY, Wed, Aug 25, 2010
KIEV - Ukraine, the world’s biggest barley exporter, postponed a decision on imposing quotas for overseas sales of cereal crops, a week after the country’s grain association said the government should delay the curbs.
“Everything depends on exports” and the decision will be delayed “indefinitely,” Agriculture Minister Mykola Prysyazhnyuk told reporters in Kiev today.
The minister on Aug. 17 said the government planned to set export quotas of 1 million metric tons for barley and 1.5 million tons for wheat from Sept. 1 through Dec. 31. A decision that was scheduled to be taken the following day was postponed until today.
Russia, the world’s third-biggest wheat producer, banned grain exports as of Aug. 15 after the country’s worst drought in at least a half century ruined crops.
Wheat traded in Chicago, a global benchmark, as much as doubled since early June on concern that the drought in Russia, flooding in Canada and a lack of rain in Kazakhstan and the European Union would limit supply.
Ukraine’s grain association, representing 80 percent of exporters, wrote to Prime Minister Mykola Azarov requesting a delay in the quotas and for a higher limit to be set.
National grain exports totaled 21.1 million tons in the marketing year that ended June 30, down from a record 24.7 million tons the previous year, according to Kiev-based researcher UkrAgroConsult.
Ukraine will sell 5.4 million tons of barley overseas in the 12 months ending in September, according to U.S. Department of Agriculture estimates. Wheat exports in the 12 months ending in June 2011 will be 6 million tons, the USDA says, 2 million tons less than it estimated in July.
--Editors: Stuart Wallace, Dan Weeks To contact the reporter on this story: Daryna Krasnolutska in Kiev at
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To contact the editor responsible for this story: Claudia Carpenter at
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2. UKRAINE SEES NO IMMEDIATE NEED FOR GRAIN EXPORT QUOTAS
Reuters, Kyiv, Ukraine, Kiev, Ukraine, Wed Aug 25, 2010
KIEV - Ukraine does not see the likelihood of imposing an export quota for grain in the immediate future, its farm minister said on Wednesday.
Asked by journalists whether the government would introduce quotas for the 2010/11 season as had been announced earlier, the minister, Mykola Prysyazhnyuk, said: "Not yet". Speaking before a cabinet meeting, he said: "The question (of quotas) will not be discussed today."
(Reporting by Natalya Zinets and Pavel Polityuk; Writing by Richard Balmforth; editing by Keiron Henderson)
LINK: http://www.reuters.com/article/idUSLDE67O0AO20100825
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3. SIGNIFICANT DROP IN VOLUME OF GRAIN EXPORTS FROM UKRAINE
2.4 times more grain was exported in 2009 vs same time period in 2010
UkrInform - Economic News online, Kyiv, Ukraine, Aug 25, 2010
KYIV - The volume of grain exports from Ukraine since the beginning of this marketing year (25 days of August plus July) has totaled 1.619 million tons, despite the fact that last year over the same period 3.946 million tons were exported, or 2.4 times more. This was stated by Head of the APK-Inform Business Projects Rodion Rybchinskiy, who commented on the statement by the Minister of Agrarian Policy, Mykola Prysiazhniuk on the issue of imposing quotas.
"Of course, a significant negative dynamics is observed," the expert said, adding that in this period more than 3 times less wheat was exported than in 2009. Thus, during the said period in 2009, 1.791 million tons were exported, and this year - 505 thousand tons.
According to the expert, the market shall have clearly prescribed rules, which it would observe, i.e. a sufficiently stable mechanism of work. "In this situation again it turns out that the problem with the export remains under manual control. In any case, this is not a positive development," he said.
As the Minister of Agrarian Policy of Ukraine, Mykola Prysiazhniuk reported earlier, the Cabinet would not consider soon the possibility of introducing quotas on grain exports.
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4. 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.
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5. GRAIN AND FEED TRADE ASSOCIATION (GAFTA) RAISES CONCERN OVER UKRAINE TRADE BARRIER
Grain and Feed Trade Association (GAFTA), London, UK, Wed, August 18, 2010
LONDON - The Grain and Feed Trade Association (GAFTA) has drawn the attention of the World Trade Organisation and the European Union to the recent disruptions to the export of wheat by the Ukrainian customs authorities.
Technical trade barriers are impairing the rights of the Ukraine’s trading partners and investors, raising serious concerns under their WTO obligations and the co-operation agreement with the EU. Any such restrictions are unlawful and will be highly trade distorting, hampering the free flow of grain and thus creating enormous costs for exporters and importers.
A spokesperson for GAFTA said: “When there are government-imposed constraints on the market it creates a major impact on trade worldwide. Barriers and limits placed on traders’ abilities to export are contrary to the spirit of the WTO and recent changes to customs clearance procedures for grain cargoes have seriously disrupted the free flow of agricultural commodities.
The quality of wheat is agreed between exporters and importers and the goods are sampled and tested at load ports by independent superintendents to check they comply with the parties’ contract specifications. These recent developments where Customs are checking to see if the wheat is for feed or ’milling’ is entirely unnecessary.
The procedures do not follow legislation; tests are not based on sound scientific methodology nor are any known acceptable sampling methods followed. In any event such intervention is not needed for export where consignments are sold on their quality specifications and do not need to state the intended purpose either for feed or bread making.
The Association (GAFTA) stands unequivocally for a globally free and open trade environment. We closely follow the principles of WTO for a liberalised trade and are very concerned to note these recent developments in the Ukraine. We have therefore drawn this to the attention of the WTO, the EU and other trading partners.”
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6. GRAIN EXPORT RESTRICTIONS IN UKRAINE - THE NEED FOR TRANSPARENT MEASURES
Statement by American Chamber of Commerce in Ukraine (Chamber) & the U.S.-Business Council (USUBC)
American Chamber of Commerce in Ukraine (Chamber), Kyiv, Ukraine
U.S.-Ukraine Business Council (USUBC), Washington, D.C.
Kyiv, Ukraine, Thursday, August 19, 2010
President of Ukraine
Mr. Viktor Yanukovych
First Deputy Head of
Administration of the President of Ukraine
Ms. Iryna Akimova
Prime Minister of Ukraine
Mr. Mykola Azarov
First Vice Prime Minister of Ukraine
Mr. Andriy Klyuev
Vice Prime Minister of Agro-Industrial Complex
Mr. Viktor Slauta
Vice Prime Minister for Economy
Mr. Sergiy Tigipko
Minister of Agrarian Policy
Mr. Mykola Prysyazhnyuk
Copy to:
Embassy of the United States of America
Ambassador Extraordinary and Plenipotentiary
Mr. John Tefft
Head of Delegation of the European Union to Ukraine
Mr. José Manuel Pinto Teixeira
Embassy of the Federal Republic of Germany
Ambassador Extraordinary and Plenipotentiary
Dr. Hans-Juergen Heimsoeth
Head of World Bank Office in Ukraine
Mr. Martin Raiser
International Monetary Fund
Resident Representative for Ukraine
Mr. Max Alier
Grain Export Restrictions in Ukraine – The Need for Transparent Measures
Wheat prices are on the rise on international markets. Despite very high stocks in the 2009/10 marketing year of 193 million tons (USDA estimate from July 2010), various factors including an unexpected reduction in the wheat acreage in Canada, a lower than expected crop in the EU and the severe drought in Russia has led to a downward revision in crop estimates. The announcement of export restrictions in Russia and Tajikistan as well as the administrative measures taken in Ukraine has led markets to increase dramatically in the first weeks of August.
The American Chamber of Commerce in Ukraine (Chamber) and the U.S.-Business Council (USUBC) understand that the Ukrainian government is concerned about increasing grain and bread prices. Bread is an important staple food in Ukraine, and it is even more important for the diet of the most vulnerable groups in the population, such as pensioners or many families with low income. There are several policy tools available to ensure the population has affordable food.
International experience has shown that a targeted approach is the most advantageous, i.e. providing income support to the most vulnerable people, so that they can afford to buy bread. Any form of trade restriction or price control is less favorable and ultimately backfires as it reduces prices for agricultural producers and pushes them to grow other crops. Furthermore, it is not targeted. Thus, high income people benefit from lower bread prices in the same way as low income people do.
The Ukrainian government is using another set of measures to restrict exports in the 2010 harvest. These can perhaps best be described as Non-Tariff Trade Barriers:
1. The State Customs of Ukraine recently sent three letters, the latest dating back to August 2, 2010, in which they informed trading houses that the quality control procedure during export will change. According to Ukrainian legislation, the State Grain Inspection had been the only State body entitled to define the quality parameters and classes of grain. But under the new instructions, State Customs have now become responsible for quality control, and the analysis is done by the forensic institute in Kyiv, Ukraine.
The aim of this measure was becoming clear on August 9, 2010, when an international trading house was blamed for having feed wheat declared as milling wheat. As the price of milling wheat is higher, the company allegedly has benefited from higher VAT reimbursements. This supposed discrepancy is, however, unlikely as both quality control analyses were done by State authorities, which are contradicting each other. Nevertheless, the vessel was detained and the General Prosecutor was instructed by the President of Ukraine to investigate.
A number of companies also have vessels fully loaded in ports waiting for the quality control of State customs. Such quality control can be done by any equipped laboratory within two hours maximum, but this is not happening.
2. For a period of time the Ukrainian Railway company was not providing railcars for grain exports. Forwarders and trading houses only received the information on this verbally. However, the measure was nevertheless effective in stopping any grain shipments to the ports for some days.
3. In addition, we have been informed that regional governments are approaching grain trading companies strongly encouraging immediate action on grain purchases at below market prices. They also threaten traders that they should expect severe measures if they do not cooperate.
Most trading companies in Ukraine are now refusing to undertake any wheat purchases, and it can be assumed that this is the intention behind all these new measures. By threatening companies or even individual persons within the companies, or by introducing nontransparent measures and arbitrary new procedures without proper justification, the wheat exports out of Ukraine have practically stopped.
These actions by government agencies will hurt the Ukrainian State in the form of lost taxes and problems with foreign credits, failures for Ukrainian companies seeking IPOs and foreign partnerships, lost revenues for Ukrainian farmers etc. It should not be forgotten that the growing role of Ukraine as Eurasia’s grain basket is bringing substantial benefits to this country and supporting its international and investment profile. Unjustified and restrictive actions by Government authorities will damage the reputation of Ukraine as a reliable international trading partner and as a country in which to invest.
The Chamber and USUBC are confident that this issue can be resolved as a matter of urgency and are willing to work with the Government to find a satisfactory solution.
Sincerely,
/s/ /s/
Jorge Zukoski Morgan Williams
President President
American Chamber of Commerce in Ukraine U.S.-Ukraine Business Council
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