World Grain - December 2006 - 10

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Ukraine allows some companies
to resume grain exports
KIEV, UKRAINE - Ukraine's Prime Minister Viktor Yanukovych
publicly apologized on Nov. 14 to Ukrainian and foreign grain traders for the grain exports' restrictions enforced by the Ukraine.
"We're sorry that this happened," he said in an interview with Gazeta
2000 weekly. He admitted the methods used to contain grain exports
were against the market principles. However, Yanukovych claimed this
was the only way to proceed under the given circumstances.
The Ukraine has said the reason for introducing quotas was to
guarantee stable supplies on the country's domestic market amid
lower grain output and higher demand on the world market.
The Ukraine's Agrarian Policy Ministry said on Nov. 20 that the
nation's seaports had resumed loading grain for exports. According
to the ministry, customs has allowed some companies to resume exports. The ministry said traders Nibulon and Yugtransservis shipped
56,600 tonnes of wheat and 37,800 tonnes of barley in November.
"All firms will be able to export volumes within received export
quotas," the ministry said in a statement. At the same time, the ministry confirmed that five export licenses for shipment of 194,000
tonnes of wheat and nine licenses for 388,000 tonnes of barley remained suspended. The ministry did not provide reason for this.
Grain traders' losses have been estimated at tens of millions of
dollars.
Yanukovych's apology follows a series of ill-fated policies aimed
at increasing government control over the Ukraine's grain exports
and the substantial backlash that followed.
On Sept. 28, the Ukrainian government introduced the licensing
of grain exports in what it saw as an effort to raise the reliability of
supply on the domestic market. The licenses were to be issued by the
Economy Ministry after agreement with the Agriculture Ministry.
Instead of issuing the licenses, an Oct. 11 governmental decree
cancelled the licensing of grain exports and instead introduced a
quota of 1.603 million tonnes on grain until the end of 2006. The
government resolution instituted a quota for the export of wheat at
400,000 tonnes, a quota for barley at 600,000 tonnes, a quota for
maize at 100,000 tonnes and a quota for rye at 3,000 tonnes.
As the government instituted this unexpected policy, grain traders
began to worry about the costs of this policy.
Further antagonizing the grain traders, the Ukrainian Deputy Agriculture Minister Petro Verbytsky on Oct. 18 said the Ukrainian
government might place a 1.8 million-tonne quota on grain exports
from Jan. 1, 2007 to July 1, 2007.
A group of large grain traders, including Alfred C. Toepfer, Cargill, Bunge, Louis Dreyfus and Russia's Yugtranzitservis, on Oct.
18 challenged in Kiev Economic Court the Ukrainian cabinet's decision to impose licensing and quotas on the export of grain Kirill
Podolsky, chief of Yugtranzitservis said.
The Ukrainian Grain Association (UGA) said that in particular,
10

An aerial view of Nibulon Ltd.'s grain export complex at Port of Nikolaev,
Ukraine. Nibulon is one a few grain traders that have been allowed to
resume grain exports following the creation of grain export restrictions in
the Ukraine. Photo courtesy of Nibulon.
cabinet resolution No. 1,364 of Sept. 28 and cabinet resolution
No. 1,418 of Oct. 11 were challenged in the court. The UGA said
that the cabinet violated the rights of grain exporters when approving these resolutions.
According to an association report, referring to Volkov and Partners law firm, representing the petitioners' interest in court, the
government violated the law on grain and the Ukrainian grain market and the law on foreign trade, and also violated the procedure
for adopting regulatory acts.
"Bunge supports the right of the government to protect the
Ukrainian food supply, but we believe there is plenty of grain,"
Dexter Frye of Bunge Ukraine said. "We believe the government
should not change the rules in the middle of the season causing
potential huge losses for companies."
Frye noted that the Ukraine's wheat crop this year is about 13.7
million tonnes compared with Ukraine's domestic food and feed usage of 8.7 million tonnes. Its barley crop this year is about 12 million
tonnes compared with domestic food and feed usage of 4.6 million
tonnes, and its maize crop this year is about 6.3 million tons compared with domestic food and feed usage of 3.6 million tonnes.
One of the first signs of policy change came on Nov. 7 when
the Ukraine's First Vice-Premier and Finance Minister Mykola Azarov said that the government might cancel restrictions on grain
exports, but only after it obtains reliable information that Ukraine
has enough bread grain reserves.
"There is no reliable information on how much bread grain we
(Continued on page 12)
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