Ukrainian Grain Market

AGRO PERSPECTIVE «Ukrainian Grain & Oilseed Market » May 19, 2011`19`(324)

Within reporting week Ukrainian domestic grains market activity was low as market operators were waiting for Verkhovna Rada to adopt draft Law on introduction of Ukrainian export duties on some kinds of grains. It is to be reminded, earlier Verkhovna Rada had already examined draft Law № 8321 stipulating that Ukrainian wheat, wheat/rye mixture (meslin) and spelt export duties should be fixed as much as 9%, but not below EUR17 per MT (barley — 14%, but not below EUR23 per MT; maize — 12%, but not below EUR20 per MT) until Jan 01/12. Thus, if this draft Law is adopted, exporters will have to pay export duties already since this year Jun 1, as draft Law stipulates that grains export duties should be introduced on first day of month which follows draft Law adoption month. 
In meanwhile, experts admit this market administrative regulation act is advantageous only for traders and State, while agrarians will become losers. However, experts say draft Law has also some positive aspects: thus, market operators will enjoy new mechanism of foreign economic activity (which will be more transparent than presently efficient grains export quoting regime). Besides, new grains export rules will correspond to demands of   international organizations/transnational companies (which are against adoption of draft Law on grains export quoting regime introduction and other draft Laws stipulating grains market State monopolization). Also, adoption of draft Law will bring positive consequences for State as grains export duties payment will contribute to State budget filling, — though at cost of Ukrainian agricultural producers.  
So, experts affirm these are namely agricultural producers which will have to bear all negative consequences of draft Law adoption as exporters will certainly take into account all additional expenditures (grains transportation and quality/origin certificates prices growth, grains duties introduction, etc.) while forming grains purchase prices. All that, say experts, is quite possible to push down grains purchase prices in near future: thus, experts expect maize purchase prices will decline within limits of export duty amount (EUR20 per MT), — that is, UAH225–235 per MT (or even up), since now traders have already accumulated grains big lots (which they have had purchased earlier without taking into account grains export duties expenditures). Thus, experts affirm it is already now possible to estimate Ukrainian agrarian sector indirect losses (as agrarians expenditures are still possible to be partially compensated by State support mechanisms) — which are to reach UAH450–540 mn, taking into account Ukrainian this year maize potential export until maize new harvest beginning (2.0–2.3 mn MT). And these are just maize trade sector losses!
In meanwhile, experts say domestic food wheat market will react just slightly upon any market events as long as grains export quoting regime remains efficient. Within reporting week domestic food wheat market was characterized with slight decline tendency: agrarians had to reduce their food wheat offer prices due to traders demand absence/flour milling industry slack demand. As a result, maize purchase prices have already exceeded high quality wheat purchase prices in some regions.  

EXPORT

• Barley 

As previously, within this week feed barley market trade activity remained rather slack due to processors low demand; it is to be mentioned, no trader made feed barley purchases.
Within reporting week feed barley market purchase prices fluctuated within UAH1,750–1,900 per MT (EXW-ex-elevator, depending on lots/regions).
Within this week feed barley US$ purchase prices were US$250–260 per MT (FOB Black Sea ports: Pivdenniy, Illichivsk, Odesa).

• Wheat     

Within reporting week traders didn’t make any feed wheat purchases. As of this week, feed wheat market offer prices ranged within UAH1,750–1,900 per MT (EXW-ex-elevator, depending on regions).                                    
Within this week feed wheat FOB basis export prices ranged within US$305–315 per MT. 
As of this week, domestic market 3 and 2 classes food wheat prices remained unchanged as of last week, correspondingly UAH1,900–2,050 per MT (EXW-ex-elevator) and UAH1,950–2,100 per MT (EXW-ex-elevator); at same time, 3 and 2 classes food wheat export prices (if global market prices conjuncture is taken into account) were correspondingly US$350–375 per MT (FOB Black Sea ports) and US$340–350 per MT (FOB Black Sea ports, depending on protein content). 

Maize 

Within reporting week feed maize market purchase prices ranged within UAH1,950–2,150 per MT (EXW-ex-elevator); prices depended on seller status (middleman or producer), shipments regions and contract conditions. It is to be mentioned, traders were ready to pay UAH2,200–2,250 per MT for big lots in ports.
As of this week, feed maize export prices fluctuated within US$310–320 per MT (FOB Black Sea ports).
Wide ranges of above-mentioned feed maize prices are motivated by fact that trade companies have declared 2 purchase prices levels: high level (for agricultural producers) and low level (for middlemen) after new Ukrainian Tax Code having had come into force.

*- protein content: minimum 12.5%
**- protein content: minimum 11.0%

Processors Activity  

Within reporting week flour millers activity remained mainly same as within previous week. Flour millers grains purchase rates were rather slack; grains were purchased just in small lots at prices slightly down against previous week. Flour millers low activity was to be explained mainly with market flour slack demand, — what, in its turn, pushed down flour millers grains resources demand. However, at same time grains owners weren’t able to sell off their grains reserves within this week due to low purchase prices and therefore anticipated for grains export quoting regime to be cancelled since this year Jun 1, — what, as to grains owners expectations, will stimulate traders to start grains purchasing.          
As earlier, within this week western/southern regions flour millers experienced grains offer deficit. Several millers affirm they didn’t receive any agrarians grains offer within 2 last months, so millers have started looking for grains in other regions.
Within reporting week mixed feeds producers didn’t change their grains purchase prices. As of this week, mixed feeds producers were interested mainly in feed maize due to traders having recently activated feed maize purchasing.          

Average purchase prices for food grains (ÑÐÒ processing plant), UAH/ò
Region	18.05.11		11.05.11		April 2011 average	March 2011 average	February 2011 average
	Min	Max	Min	Max
2nd class wheat*
Western	2080	2400	2080	2400	2245	2200	1945
Northern	2080	2280	2100	2280	2215	2180	1975
Central	2050	2280	2080	2280	2195	2170	1985
Southern	2050	2250	2050	2250	2180	2160	2005
Eastern	2080	2300	2080	2300	2195	2180	2000
3rd class wheat**
Western	2030	2250	2030	2250	2145	2110	1880
Northern	2030	2220	2030	2220	2135	2110	1910
Central	2020	2200	2020	2200	2130	2110	1925
Southern	1950	2200	1950	2200	2075	2090	1940
Eastern	2000	2200	2000	2200	2120	2110	1935
Eastern	1900	2000	1870	2000	1935	1855	1550

*- protein content: minimum 12.5%
**- protein content: minimum 11.0%

31.05.2011