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Ukraine may extend contentious grain export levies


download Controversial grain export duties in Ukraine, blamed for a slump in shipments which has sparked fears over where withheld crops will be stored, may be extended until July – and even to other crops.

Rather than shortening the period of the levies, which Ukraine’s farm ministry has lobbied for repeal, the tariffs may be extended until the end of 2011-12, Andriy Klyuev, Ukraine first deputy prime minister, said, according to news agency Unian.

The statement follows signals from Ukraine’s economy ministry that the duties would be retained until July – adding that they may be extended from barley, corn and wheat to soybeans and sunflower oil too.

Ukraine is, by a distance, the world’s top exporter of sunflower oil, with shipments forecast by the US Department of Agriculture at 2.65m tonnes in 2011-12.

Exports dip

The comments follow growing concern over the impact of the existing levies, set at up to 14%, on shipments, with USDA attaches in Kiev, citing farm ministry "sources", saying that grain shipments over July and August had fallen to 1m tonnes.

Last year, Ukraine exported 800,000 tonnes of barley and 400,000 tonnes of wheat in July alone.

While other analysts have more upbeat estimates for shipments – with the Ukrainian Agrarian Federation pegging them at 1.8m tonnes over July and August and UkrAgroConsult analysts seeing the figure at about 1.3m tonnes up to August 27 – all estimates show a steep drop in exports.

However, Ukraine’s trade ministry "does not consider these export duties to be a barrier for trade", the USDA attaches said.

"They expect the world market prices to go up this season, thus allowing for a greater profit margin for Ukrainian grain traders."

One reason for extending the levies to July would be to remove the incentive for farmers and merchants to stockpile grain, in expectation of the removal of duties from January.

‘Logistical issue’

The increase in domestic grain stocks implied by a strong summer harvest and weak exports has prompted fears for the country’s storage capacity – ahead of a corn crop expected to set a record high.

The attaches, warned of "a logistical issue" in October as the corn crop comes in at a time when domestic silos are already full.

"Since corn is an economically more profitable crop for Ukrainian agriculture, it is a common practice for medium and small size producers in Ukraine to sell the majority of wheat and barley right after harvest and store corn for months on the expectation of higher world market prices later in the season," they said.

Agritel, noting that the lack of storage space was "a concern for farmers", estimated that Ukraine needed to export at least 7m tonnes of crop by the end of the autumn harvests to avoid silo congestion.

"The country can stock 55m tonnes of grains, no more. Cereals and oleaginous harvests are estimated to 60-62m tonnes," the Paris-based consultancy said.

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