Record harvest

According to the Ukrainian Agrarian Confederation’s data, our country exported nearly 380,000 tons of grain this July, hitting the multi-year low. Less than 600,000 tons of grain were exported in the first half of August. Full month’s export for August will not exceed 1.2 million tons, predicts Serhii Stoianov, general director of the Ukrainian Agrarian Confederation. Particularly, the export of wheat totaled 160,000 tons for the first month of the new marketing year (July 2011 to June 2012), while corn exports came to 40,000 tons and about 170,000 tons of barley were exported during this period. “This is just half of what is needed for efficient functioning of the market, or, to be more exact, for freeing storage space for the future harvest of the late crops,” Stoianov says.

The current market slowdown threatens, above all, the record corn harvest of 18 million tons. For, as the expert notes, grain of this rather capricious crop would just go bad without sufficient capacity for its processing and storage.

According to Stoianov, exports were slow due to the fact that farmers kept the harvest on farm as they did not want to sell it at the current prices. The expert says that grain farmers have sufficient number of facilities for primary storing of about 25-27 million tons. This figure matters a lot for the market signifying high risks.

Firstly, as we have already noted, these 25-27 million tons occupy most of the country’s sto-rage space, preventing the late crops from being stored. Secondly, instead of the expected increase in grain prices before the New Year holidays, farmers may face the declining prices, Stoianov says, because saturated market will be expecting the new harvest already by that time.

The domestic grain prices are additionally affected by export duties and the lack of VAT rebates. “They take away the profits that our producers could have realized at the international market,” the director general of Ukrainian Agrarian Confederation says.

We would remind you that the Ukrainian government imposed tariffs on exports of wheat (9 percent of value but not less than 17 euros per ton), corn (12 percent of value but not less than 20 euros per ton) and barley (14 percent of value, but not less than 23 euros per ton), all to come into effect from July 1, 2011 to January 1, 2012.

The agricultural market participants repeatedly protested the imposition of tariffs on grain exports saying it would lead to a significant fall in the domestic prices and entail losses for farmers.

By the way, Russia and Kazakhstan are not Ukraine’s partners but competitors. As Stoianov notes, Ukraine would benefit nothing from joining forces with these two countries on the international grain market, as Russian producers outcompete Ukrainian ones now, due to lower production costs at Russian farms.

It will be recalled that Ukraine’s Prime Minister Mykola Azarov said last week that Ukraine, Russia and Kazakhstan would benefit from co-operating on the international market, as the combined grain export potential of Ukraine, Russia and Kazakhstan was almost 75 million tons. Azarov noted: “Having combined our potentials, we would win a great share of the international market. So the question arises – whether it would be easier to enter the market together or to do it separately?”