Ukraine gives final approval for minimum grain export prices

Ukraine gives final approval for minimum grain export prices

Ukraine has approved the final details of a new system of minimum export prices for the country's key grains and oilseeds shipments, the government said on Tuesday, a plan that grains traders say could disrupt exports and their trade.

The government launched the plan to tackle price distortions linked to the war with Russia, which has seen an increase in domestic cash purchases of some agricultural products and their subsequent export at artificially low prices to avoid taxes.

The cabinet has now approved the procedure for setting the minimum prices, clearing the way for them to be introduced. Ukrainian officials have said the new scheme could be launched in August, but it is not yet clear exactly when the new rules will come into effect.

The new export price mechanism will apply to shipments of wheat, corn, sunflower oil, soybeans, rapeseed and some other agricultural commodities, which remain Ukraine's biggest source of external revenues.

In line with the new rules, minimum permissible export prices will be calculated on the basis of the state customs service data, taking into account the terms of delivery for the previous month and using a 10% discount.

Traders' union UGA said the minimum export prices would put half of Ukraine's exports at risk, could destroy the forward contract system and lead to uncertainty in the market regarding the fulfilment of exporters' obligations and grain purchases.

It said many enterprises used bank loans that are secured by forward contracts. The absence of such contracts would prevent farmers from obtaining loans.