Ukraine traders expect wheat export curbs soon

Grain traders expect the Ukrainian government to introduce curbs on wheat exports early in December but fear that instead of an official ban it might opt for informal restrictions, the grain lobby said Friday.

Agriculture Minister Mykola Prysyazhnyuk said last month the government would halt wheat exports from Nov. 15 due to a fall in the harvest to prevent a rise in domestic bread prices.

Subsequently after criticism from the European Union and Ukraine’s main importers, the ministry softened its talk of an outright ban. It said it would apply "necessary measures" to limit sales if a critical shortage of food grain appeared.

"We were told that if we continue exporting wheat after Dec. 1, the government may take measures. They did not say what measures could be taken," Volodymyr Klymenko, head of the Ukrainian grain traders’ union UZA, told a news conference.

"But we asked them that if a ban on exports were to be imposed, it should be official," he said.

Grain traders prefer a clear-cut ban, because unofficial barriers, which involve increased red tape, tend to favour some privileged companies, which would rebound on Ukraine’s image as a world trader.

Traders and analysts say the government needs to limit sales because wheat stock levels at home are not high enough to guarantee the current high pace of exports.

Ukraine in the 2010-11 season imposed informal export barriers on wheat after a disappointing harvest. Exporters faced huge costs because they failed to meet contracts.

Ukraine is a traditional exporter of wheat for livestock feed but this year wheat quality improved and feed wheat shrank to about 20 per cent of the country’s total wheat harvest from 50 percent a year earlier.

The former Soviet republic consumes 12 million tonnes of wheat, including 4.7 million tonnes of food wheat, per season.

In August, the agriculture ministry and traders agreed that wheat exports could not exceed four million tonnes this year, but in October the maximum volume had been increased to 5.5 million tonnes.

Record exports

Klymenko said Ukraine’s grain exports could this month reach a record high level for a second straight month, because traders have been speeding up shipments in expectation of government curbs.

He said Ukraine could sell abroad up to three million tonnes of grain in November after exports of 2.9 million in October.

Wheat dominated that volume, he said.

Minister Prysyazhnyuk said this week exports reached 9.2 million tonnes of grain as of Nov. 7 and would increase by 1.5 million tonnes more shortly. He said Ukraine had exported 850,000 tonnes of grain in the first week of November.

The government has said exports could total 20-21 million tonnes in 2012-13 versus 22.8 million tonnes in 2011-12.

Klymenko said that domestic trading houses had suspended wheat deals and switched to maize.

Ukraine, which boosted its maize harvest in the past few years, plans to export no less than 12 million tonnes in 2012-13.

But Klymenko also said the government was likely to allow exports of wheat late this season and that traders could export another roughly one million tonnes of wheat by the end of the season.

He said Ukraine was able to export 6.5 million tonnes of wheat this season without hurting the domestic market.

– Pavel Polityuk writes for Reuters from Kiev.