Industry MOU 'may do little' to limit Ukrainian grain exports

19.07.2016

An agreement to limit grain exports, signed between the Ukrainian government, and the industry, may do little to slow the pace of shipments, US government officials warned.

The US Department of Agriculture's Kiev Bureau sees wheat stocks falling to a four-year low, as the rallying price spurs export demand.

Last week the Ukrainian Minister of Agricultural signed a memorandum of understanding (MOU) with farmers, and other representatives of the grain trade.

The non-binding MOU agrees exportable levels for major grains, and is designed to prevent too-heavy exports draining domestic stocks.

'No actual limiting effect'

The MOU has not specified export levels as of yet, but agrees that volumes for the year to July 2017 will be set in negotiations, bot be completed by September of this year.

The new MoU does not yet contain the specific export volumes. Instead it states that these will be negotiated separately before September 15, 2016.

But a note from the The US Department of Agriculture's Kiev bureau suggested that this system would do little to limit exports.

Based on the fact that exports ran nearly a million tonnes ahead of the amount specified in the 2015-16 MOU, the bureau suggested that "the conclusion could be made that last year's MOU had no actual limiting effect for grain exports".

Surging exports

Last week the USDA's Kiev bureau predicted heavier Ukrainian exports, and shrinking stocks.

The bureau saw "surging" wheat and exports, fuelled by the recent recovery in prices, sending wheat stocks to a four-year low.

The bureau noted the "increase of domestic prices for these commodities induced by international markets".

The bureau forecast wheat exports at 13.00m tonnes, compared to the 12.5m tonne forecast in the USDA's Wasde report, which was released on Tuesday.  

This is still down from last year's record wheat exports, which the Wasde pegged at 17.0m tonnes, and the bureau has even higher, at 17.8m tonnes.

Thinner stocks

"Domestic wheat consumption is dropping due to decreasing population as well as loss of governmental control over the Crimean Peninsula and parts of the territories in Eastern Ukraine," the bureau said.

"According to industry insiders flour mills in Ukraine are running at approximately 30% of their capacity and millers are trying to balance shrinking domestic consumption with exports."

Even so, the higher exports, in both the 2016-17 and the 2015-16 marketing year, mean that the Kiev Bureau sees a sharply lower wheat stocks.

The bureau forecast ending stocks at just 2.7m tonnes, compared to 3.1m tonnes in the latest Wasde.
Corn exports were seen at 17.8m tonnes in 2016-17, leaving ending stocks at 1.7m tonnes.
This would by some 800,000 tonnes more than the Wasde forecast.     


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