To tackle war-linked price distortions, Ukraine approves new export regime for grains

Aug. 20, 2024, 12:19 p.m.

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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 introduced a plan to address price irregularities caused by the war with Russia. This war has led to a surge in domestic cash purchases of certain agricultural goods followed by their export at artificially low prices to circumvent taxes.

The Ukrainian government has finalized the process for setting minimum grain prices, paving the way for their implementation. Ukrainian officials have indicated that the new system could come into effect in August, although the exact date remains uncertain.

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.

Under the new regulations, the minimum acceptable export prices will be determined based on data from the state customs service, considering the previous month's delivery terms and applying 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.

The government stated that numerous businesses rely on bank loans secured by forward contracts. The absence of these contracts would hinder farmers' access to loans.