Ukraine’s agriculture ministry and traders are considering extending an existing informal cap on grain exports into the 2013-14 marketing year, the ministry said on Monday, a move that would give government greater sway over domestic grain prices.
"We plan to sign the memorandum in coming months," minister Mykola Prysyazhnyuk said in a statement.
Last September, the ministry and traders’ unions agreed on 2012-13 maximum export volumes after a drought and a spike in foreign demand threatened to leave Ukraine without enough grain for domestic consumption.
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The pact came as major importers moved swiftly to secure grain supplies from the Black Sea region, driven by fears that drought-stricken neighbour Russia may eventually be forced to impose export controls.
Worried about a potential deficit, the government forced traders to limit wheat exports to 5.5 million tonnes in the 2012-13 season, although it later raised the cap to 6.3 million tonnes.
The Kiev government used the memorandum — in which traders "voluntarily" pledged to limit exports — instead of formal restrictions which could go against Ukraine’s WTO commitments.
Although there is no such threat on the horizon this season, given a much higher expected harvest, market players say the ministry does not want to give up its new powers.
Having a memorandum in place would allow the government to react quickly to any changes in market conditions and mitigate risks of sharp increases in domestic prices. The plan, however, disappointed some market players.
"Their (the authorities’) main goal is to control the market," said a foreign trader based in Kiev. "But right now this year’s harvest looks very good and therefore I think there is no need for such a memorandum."
The Agriculture Ministry sees this year’s grain harvest at no less than 50 million tonnes compared with 46.2 million tonnes in 2012. Agriculture analysts put output at 53 million to 55 million tonnes in 2013.
— Reporting for Reuters by Pavel Polityuk in Kiev.
