Grain Association Calls for Suspension of Minimum Export Price Mechanism and Names Consequences
The Ukrainian Grain Association (UGA) calls on the President and the government to suspend the implementation of the mechanism of minimum export prices for agricultural products.
According to Ukrinform, this was reported by the press service of the association.
“The Ukrainian Grain Association believes that the introduction of the so-called minimum price mechanism will lead to a significant drop in grain exports from Ukraine and losses for agricultural producers,” the statement said.
The association believes that the introduction of the minimum export price mechanism “will have an extremely negative impact on the ability of exporters to fulfill their obligations, undermine the confidence of international partners in Ukrainian counterparties, complicate the planning and financing of export activities, and at the same time reduce the competitiveness of Ukrainian goods on world markets.”
If the minimum prices do not correspond to global price trends, it will destroy competition in the Ukrainian grain market and lead to its overregulation and create new opportunities for corruption, the UGA warns.
In addition, the introduction of minimum prices will effectively destroy the system of forward contracts that allow exporters to plan logistics operations in advance. The absence of such agreements can lead to delays and increased costs, including insurance.
The UGA reminds that the Ukrainian market already trades in several types of contracts, including forward contracts with delivery in 2-6 months with a fixed price and forward contracts with a price tied to the exchange. By February 2022, forward contracts accounted for up to 40% of the total sales plan of medium-sized farmers (2-10 thousand hectares).
In addition, the introduction of minimum export prices leads to a breach of obligations, loss of confidence in the exporting country and litigation, and a reduction in investment in the agricultural sector. This will force importers to be “more careful” when entering into new agreements with Ukrainian exporters.
“Regulation of exporters’ prices by setting a minimum price contradicts the norms of the World Trade Organization (WTO), of which Ukraine is a member, in particular the principles of free trade and non-discrimination,” the UGA states.
As reported, on May 9, 2024, the Verkhovna Rada adopted in the second reading bills No. 10168-2 and No. 10169-2, which provide for the introduction of minimum export prices for agricultural products; on June 18, the President of Ukraine signed the laws.
The Ministry of Agrarian Policy is developing a procedure for setting minimum prices for agricultural exports.
In the 2023/2024 marketing year, as of May 31, 2024, Ukraine exported almost USD 16.6 billion worth of grain, oilseeds and products from them, which corresponds to about half of Ukraine’s exports in monetary terms.
Analysts say that the preliminary prices for sunflowers of the new crop are up to 20,000/ton.
