Ukraine offers the European Union its grain

The Government has turned to the European Union (EU) with a request to drop its restrictions on imports of Ukrainian grain, says First Deputy Premier Oleksandr Turchynov.

It will be extremely difficult for Ukraine to gain any concessions from the EU, say experts. The European Union has instituted caps to protect its own farmers from the negative impact of the high global harvest.

First Deputy Premier Oleksandr Turchynov revealed that the Government had turned to the European Commission with this request to remove restrictions on the import of Ukrainian grain. “We have sent the necessary request regarding grain,” he said, noting that Ukraine has not given grounds to have its grain restricted. According to Mr. Turchynov, this kind of action is unacceptable according to the terms of Ukraine’s membership in the World Trade Organization (WTO).

On 27 October, the European Union established a two-year import surtax: EUR 95/t for wheat, EUR 93/t for barley, EUR 24.16/t of rice and sorghum, EUR 8.68/t for corn. Ukraine will be able to import only 628,000 t of wheat to EU countries at the EUR 12/t rate during the current marketing year, which ends 1 July 2009.

For the first 11 months of 2008, according to the Ukrainian Agrobusiness Club, of the total volume exported for delivery to EU countries, around 30% was wheat, worth a total of US $989mn. In addition, 10% was barley, worth US $993mn and 40% was corn, worth a total of US $574mn.

The president of the Ukrainian Grain Growers’ Association, Volodymyr Klymenko, suggested that Mr. Turchynov’s announcement was the Government’s response to a request from the Association, which had been sent to Premier Yulia Tymoshenko. In the letter sent by the UGGA, the Association requested “immediate Government action to stimulate grain exports.”

“We also pointed out that the Cabinet’s working group for the grain market, which Oleksandr Turchynov chairs, has been largely inactive this past year,” noted Mr. Klymenko.

Ukraine’s grain growers are demanding that Ukraine be given specific quotas for deliveries to EU countries with a zero-rate duty. “If this isn’t done, by 1 July, the start of the new marketing year, Ukraine could find itself with 20mn t of transitory grain surplus when domestic demand is only 26mn t,” said the Association’s representative.

This past year, Ukraine’s grain harvest was 54mn t, compared to only 29.3mn t the previous year. This coupled with restricted imports of Ukrainian grain to EU countries and Egypt’s decision not to buy Ukrainian grain caused the price of wheat to collapse. According to the German-Ukrainian Policy Dialog in Agriculture group, the price for food wheat fell 36% to UAH 900/t, feed wheat fell 23% to UAH 730/t, and barley fell 32% to UAH 800/t between 2 September and 16 December.

“In this kind of situation, we could see the area sown with grain sharply reduced,” said a GUPDA statement. “Such low prices mean that the farm sector may not have enough resources for the next sowing.” Area sown in wheat alone could be cut by 1mn hectares already in the 2008/2009 marketing year. Last year, 6.29mn ha were sown.

According to Verkhovna Rada Farm Policy and Land Relations Committee Chair Mykola Prysiazhniuk, the chances of getting the export restrictions removed are minimal. “The EU instituted these caps to protect its own farming sector and has made it clear on more than one occasion that all its methods for doing so are completely justified,” he says.

“In this year, the EU itself had a harvest that was 15mn t higher than last years,” notes UkrAgroConsult Director Serhiy Feofilov. “It’s unlikely that Ukraine’s Government will be able to persuade the EU to accept any compromises in return for canceling or reducing duty.”

Tags: grain