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Ukraine ups export forecast, urges new standards

Ukraine’s agriculture ministry on Tuesday increased its grain export forecast to 17.5 million tons for 2008-2009 from 15 million and analysts said the government was intervening to support collapsing local prices.

“According to the latest balances, exports are seen at 17.5 million tons,” the head of the ministry’s marketing department, Anatoly Razgon, told Reuters on the sidelines of a ministerial meeting on grain markets.

Ukraine’s government last week boosted its 2008 grain crop forecast to 43 million tons, including at least 20 million tons of wheat, from the previous figure of 40 million. Last year’s harvest came in at 29.3 million tons. Analysts and traders have produced similar forecasts for the 2008 harvest, but put exports at 16 million tons. “We have a sharp increase in grain supply and the exports should be encouraged, but on the other hand the government is trying to support local prices,” said Svetlana Balandina from the leading UkrAgroConsult agriculture consultancy. “We have about 23 million tonnes of wheat and most of it is feed wheat.”

According to producers, local feed wheat prices fell to a maximum of $144 per tonne EXW in early August from about $248 in March 2008 and $188 in October 2007. Volodymyr Klymenko, the head of the grain traders’ union UZA, told Reuters on Monday his export forecast of 16 milion tons included 7 million of wheat, up to 5 million of barley, about 3 million of maize and 1 million of other cereals. He said exports were unlikely to exceed 16 million tons because of limited infrastructure capacity.


Razgon said the ministry’s forecast for the milling wheat harvest was about 9 million tons - almost the same as in 2008. He saw no problems for stable exports this season. But traders noted that uncertainty with local wheat standards made possible manipulation of wheat quality. “Due to a different interpretation of standards, no one can say how much food grain Ukraine has,” said Olexiy Vadatursky, head of the large Nibulon grain company.

Ukrainian wheat is divided into several classes of quality depending on protein, gluten content, pest damage and other factors. But much of this year’s crop has high protein content offset by low gluten level, sending it into the feed grain category. Prime Minister Yulia Tymoshenko said on Tuesday ministries had to upgrade standards immediately. “The standards...must be upgraded from today. We must guard against any chaos,” Tymoshenko said. Razgon told Reuters the ministry was likely to propose a new form of classification which would ignore gluten levels and make wheat quality dependent strictly on protein content.

Analysts say a possible revision could increase the share of milling wheat.

But traders also said a warm winter had created favorable conditions for the proliferation of wheat bug, with about 4.5% of wheat-fields sustaining damaged and overall quality suffering sharply. “It’s a disaster and poses an even greater danger than floods in western Ukraine,” Vadatursky said.

Ukraine had the same infestation problem several years ago and importers turned back wheat shipment due to large damage. (Reuters)