Ukraine Wheat Exports Threatened

By MICHAEL HADDON and NEENA RAI

5.4 million metric tons of wheat

Ukraine’s stocks of exportable wheat may run out within weeks, according to the country’s agriculture ministry, meaning it could become the first leading producer to impose trade restrictions that could lead to a further damaging spike in world food prices.

The country has contracted a total of 5.4 million metric tons of wheat for shipment this marketing year, which already accounts for the country’s total exportable surplus, Ukraine’s First Deputy Agriculture Minister Ivan Bisyuk said in a statement on the ministry’s website. Kiev said its stocks would be depleted by around Nov. 15 to Nov. 20.

“This is a major concern for global food security, as one of the main hopes that another food price spike could be avoided rested upon the perception that countries are less willing to impose export controls than they were in 2008 and 2010,” said Rob Bailey, senior research fellow for energy, environment and resources at Chatham House, a London-based independent think-tank on foreign affairs.

Summer droughts have scorched crops across the globe, including Ukraine—the ninth largest wheat exporter behind India and Argentina—causing sharp increases in the price of corn, wheat and soybeans, and raising fears of a repeat of the 2007-2008 world food crisis.

Last month, the United Nations warned urgent action was needed to prevent a catastrophe, but said panic buying and export restrictions weren’t the solution.

The Group of 20 leading industrialized and emerging nations recently called off an emergency meeting to discuss grain supply problems and ways to temper volatile prices.

Washington, which made the decision as chair of the G-20’s agriculture initiative, said that related commodity markets were functioning and governments have “exercised prudence and responsibility in policy-making, including avoiding export bans that exacerbated volatility in 2007-08.”

Any action by Ukraine to limit exports “will be of particular concern to the major wheat importing countries of North Africa and the Middle East, a number of which are still in highly fragile circumstances following last year’s Arab Spring, itself triggered by high wheat prices following export bans in Russia and Ukraine,” said Chatham House’s Mr. Bailey.

“We don’t know yet what form the limitations on wheat exports will take, either a complete ban or export quotas,” said a Kiev-based grain trader.

Any limits on exports would also affect the Ukrainian domestic wheat market, potentially driving down domestic prices as more supply becomes locally available.

“Grain exporters will have to switch to other grains, especially corn as the agriculture ministry said today no curbs on the export of other grains were being considered,” said the grain trader.

Russia’s wheat supplies are also tight, but the government has sent mixed signals about whether it could curb exports.

—Grigori Gerenstein in Moscow contributed to this article.
Write to Michael Haddon at michael.haddon@dowjones.com and Neena Rai at neena.rai@dowjones.com

 

Courtesy: WSJ

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