Required Report - public distribution

**Date:** 10/2/2007

**GAIN Report Number:** UP7021

UP7021

**Ukraine**

**Grain and Feed**

**Ukraine Extends Grain Export Quotas**

**Approved by:**

![](media/image1.wmf)W. Garth Thorburn, Agricultural Attaché

U.S. Embassy, Kyiv

**Prepared by:**

Olena Pereyatenets

**Report Highlights:**

The government of Ukraine (GOU) extended for five months the export
quotas for grains. The quotas were introduced to ensure an adequate
supply of grain for the domestic market.

GOU also justified the export quotas on the slow winter crop planting
campaign, the high price for grains and insufficient stocks of grain in
the state reserves.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Kiev \[UP1\]

\[UP\]

# Executive Summary

The government of Ukraine extended the current export quotas for grains
from November 1, 2007 through March 31, 2008, three months longer than
expected. The grain industry expected the newly announced quota to go
into effect only from October 1 through December 31, but the GOU decided
not to take a risk prior to the September Parliamentary elections and to
ensure the domestic market had adequate stocks of grain.

Earlier, during a press conference on August 14, 2007, Vice-Prime
Minister V. Slauta did not exclude the possibility of total grain
exports for marketing year 2007/2008 reaching 5-to-6 million tons.

# 

# Export Grain Quotas Introduced in Ukraine. 

The Cabinet of Ministers of Ukraine adopted Decree #1179, dated
September 26, 2007, and officially published on October 2, 2007. The
decree becomes effective on November 1, 2007 and imposes a new and
larger export quota for each of the grains (wheat, barley, corn and rye)
through March 31, 2008. The total size of the new export quota is
1,203,000 tons and is much lower than the grain traders predicted.

The new quota levels are at the following levels:

\-- Corn - 600,000 tons;

\-- Barley - 400,000 tons;

\-- Feed Wheat - 200,000 tons;

\-- Rye - 3,000 tons.

The mechanism used to allocate the quotas remains the same as last year.
80 percent of the quotas will be divided proportionally between grain
exporters, all who exported grain over the past three years. The
remaining 20 percent of the quotas will be distributed to other
companies.

# 

# Exports

FAS Kyiv estimates that the total quota of 1,203,000 tons represents
approximately 30 percent of what Ukraine can expect to export for the
entire marketing year.

Export Quotas VS Exportable Surplus, 1.000 MT

  ------------------- ------------------------ --------------------------
  **Commodity**       **Export surplus**       **Export quota**

  Wheat               1,500                    200

  Barley              1,000                    400

  Corn                1,500                    600

  Rye                 10                       3

  **Total**           **4,010**                **1,203**
  ------------------- ------------------------ --------------------------

Source: FAS-Kyiv Estimates

# Prices

The domestic price of grains has increased since the beginning of the
new marketing year, following the same trend as world prices. The
imposition of export quotas which actually served as a ban beginning
July 1, prevented domestic prices from reaching world prices but prices
increased more than the GOU expected. The graph below shows the price
difference between the Ukrainian domestic grain price and world prices.
Please note that the world price is a FAS-Kyiv estimate. (Black Sea FOB
price, minus the fobbing cost and transport delivery from silo to the
port)

![](media/image2.wmf){width="5.997222222222222in"
height="3.345833333333333in"}

# Ukrainian Grain Producers and Farmers

Ukrainian farmers did not suffer from the gap between the domestic and
world price of grain because prices were still higher then expected. The
majority of Ukrainian grain producers and sellers will hold on to their
stocks until the GOU cancels or extends the quotas. They have sold some
grain to cover operational costs and to repay interest payments on
loans. Ukrainian producers have preformed well in rapeseed, soybean and
sunflower sales because the price almost doubled for these crops from
July to September 2007. This strong income gain has enabled grain
producers to hold on to their grains until such time all restrictions
are lifted.

# Conclusion

Unlike last marketing year, the impact of the grain export quotas for
marketing year 2007/2008 has been much less than anticipated for
producers and exporters. This year the government of Ukraine gave early
signals on their intentions to restrict the export of grains again.
Grain traders were able to react quickly and did not make significant
purchases of grain, which they knew would be subjected to some export
restrictions. However, they expected the size of the quotas be larger
given it covers a five month period. The Ukrainian Ministry of
Agriculture promises to extend the quotas after March 31, 2008 when they
will have access to more information on the 2008/2009 grains crop.