A new trend is appearing on the world grain market this year with Ukraine, Russia, and Kazakhstan gaining a firmer foothold and threatening to oust traditional exporters. Russia’s grain market experts claim this is due to forecasts of markedly lower yields for the four leading exporters, Canada, the USA, Australia, and Argentina, against last year’s bumper crop. They could be supplanted on the world market by nontraditional exporters such as the former Soviet republics as well as India and Turkey. Experts of the information service of Ukraine’s Olimpeks Company told Interfax-Ukraine that since the beginning of the new market year (July 1, 2002 through June 31, 2003) bread grain from Russia and Ukraine has virtually ousted not only North American and Australian grain but also that of EU from the markets of southern Europe and some North African countries. According to their estimates, grain prices in Europe are quite stable and even tend to decline slightly, which is largely due to competition from cheap Ukrainian and Russian grain. According to recent estimates, Russia has threshed about 68 million tons of grain. Ukraine comes next with 36 million tons followed by Kazakhstan with over 27 million tons.
It appears that the trade rivalry between Ukraine and Russia is beginning to affect the world grain market. According to Anatoly Razhon, chief of the Department for the Development of Enterprises and Agricultural Markets of Ukraine’s Ministry for Agrarian Policy, even at the present stage our grain export interests intersect in Europe, Brazil, North Africa, and the Middle East. Mind you, Russia has been operating under more favorable conditions from the start. According to Mr. Razhon, the average price of grain produced in Russia is $55-60 per ton, while Ukraine sells its grain at $67-70 per ton.
In 2002, Ukraine initially planned to export 7 to 9 million tons of grain, with last year’s exports totaling 9.1 million tons. However, following a spate of natural disasters in Europe, Western experts reduced the forecast rates of world grain production by 15% down from 2001. This enabled the Ministry for Agrarian Policy to raise the forecast of Ukrainian grain exports up to 12 million tons. Mr. Razhon believes that there is every precondition for these export targets to be achieved. To illustrate, as of August 29, deals have been concluded for the export of 4.2 tons of grain, which by far exceeds last year’s figure.
However, the bright prospects for exports so far provide no solace to those who brought in this year’s harvest. Despite all the verbal effort of our politicians to the effect that buying prices for grain are being supported, they are unacceptably low. As a result, agricultural producers sustain heavy losses. Nonetheless, the Ministry for Agrarian Policy believes that the time will come when successful export policy will produce a favorable effect on the domestic grain market and stabilize it. “If grain exports reach 12 million tons, the price of grade 3 grain will be set at UAH 450-500 (about $85- $95 US) per ton as soon early 2003,” he said.
Agrarian market experts predict that this year Ukraine could well find itself among the world’s five leading grain exporters. We can only wish this will secure Ukraine a high place on the ladder for the long term and hope it is not a temporary phenomenon largely provoked by misfortunes in the US and Europe. In this context, an interesting viewpoint was expressed by Yevhen Koftaniuk, Director General of the Ukrzernoprodukt National Association. He maintains that Ukraine as yet has not become an exporter of grain in the true sense of this word. To be considered a true exporter, Ukraine would have to deliver its grain to the point of destination. According to Mr. Koftaniuk, Ukraine sells all of it to multinational trading companies thus parting with 15 to 30% of the profit. A recently adopted law, On the Grain Market, envisions setting up a state brokerage company to deal with exports and imports of grain. However, to implement this law UAH 300-400 million will be needed come 2003.
