Ukraine grain lobby says fears oversupply

An expected large grain harvest this year could flood Ukraine’s domestic market, depressing prices and pushing farmers into the red, the Ukrainian Agrarian Confederation, a lobbying group, said Tuesday, urging the government to increase purchases.

The former Soviet republic, a major world producer of maize, wheat and barley, could harvest 55-58 million tonnes of grain this year, according to UAC and government estimates, up from 46 million tonnes in 2012.

“The export potential is 27-29 million tonnes,” it said in a statement.

“However it is not clear how much of that will be actually exported and this will depend on the increase in global demand and resolving the issues with (the lack of) rail transport in Ukraine.”

Ukraine’s main export clients are in the Middle East and North Africa.

Weak global demand has already driven down prices and they could come under further pressure from a strong harvest in the main grain-growing countries, UAC said.

“If, for example, last year’s milling wheat harvest sold mostly within the $300-360 per tonne global price range, this year we can only expect $240 per tonne,” it said.

“(Ukrainian farmers) see the state of affairs in the grain sector as disastrous.”

UAC urged the government to purchase “adequate” volumes of grain on the market at prices higher than those offered by traders.

It also called on farmers to delay grain sales for as long as possible in hope that prices will rise.

— Reporting for Reuters by Olzhas Auyezov from Kiev, Ukraine.

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