Ukraine: Grains Strong, Export Quota A Possibility
4 April 2007 Additionally, corn production is expected to increase over the previous year due to yield increases and lower harvest losses. However, the area planted with spring corn is expected to decrease around 7%.
A more pressing issue for the country’s ag industry is the change in government policy that occurred abruptly in August 2006 with the formation of the new coalition government. The Minister of Agriculture is a member of the coalition, and has moved policy away from free market policy and towards more government intervention.
One of these poliscy changes was the introduction of export quotas and licensing for grains. This measure was put in place only two months after Ukraine began experiencing strong exports of grains, and came without warning for many in the industry. As a result, grain traders were unable to fulfill contracts, incurred heavy financial losses, and were unable to clear stocks.
The export quota system for feed grains was implemented over a five-month period in 2006/2007 and was cancelled in February for all grains except wheat. The wheat export quota is very small, at 228,000 tons.
The losses by international grain trading companies due to the export quota policy were estimated by the World Bank at US $300 million, while the Ukrainian Grains Association estimates that trading companies’ losses were around US $100 million.
For 2007/2008, the government could re-introduce export quotas for grains, according to comments from the Ministry of Agriculture. The official estimation for total grain exports for the coming year is 10 to 11 million tons. A.Rozgon, Head of the Agricultural Market Development Department, said at the end of February that "if international exporters will aggressively export grains in the beginning of the season as they did in July through September 2006, the government will once again introduce export quotas."
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