Ukraine seeks to curb grain exports in 2010/11-UPDATE 2

Trade the News

Friday August 13, 2010 12:59:11 AM GMT

* Final decision to be made next week

* Wheat could be a subject of restriction

(Adds farm minister, traders comments)

By Natalia Zinets and Pavel Polityuk

KIEV, Aug 11 (Reuters) - The Ukrainian government, fearful of a possible food grain shortage at home, said on Wednesday it was considering curbing grain exports, although a final decision would be made next week.

The grain harvest in Ukraine, the world's No 1 exporter of barley and sixth-largest of wheat, is likely to fall 13 percent to 40-42 million tonnes this year from last, after severe winter frosts and a scorching summer heatwave. It needs more than half of that total for itself.

Although the quotas are likely to be small, the announcement could rattle grain markets already jittery after Russia, stricken by the worst drought in 130 years, announced ann export ban, helping global wheat prices soar to two-year highs. Prices have since retreated, but remain volatile.

"If quotas are imposed it would be on wheat," Agriculture Minister Mykola Prysyazhnyuk told a news conference, but later said maize and other cereals could also be subject to restrictions. "The first quota proposal could be 7 to 8 million tonnes. This is for all grains. The final volume of quotas could be after maize harvesting," he said. Ukraine is among the world's top five exporters of maize.

Local analysts said the export quotas, rather than an outright ban, could help to bring some calm to the market.

"It (quotas) seems to be an acceptable decision. It could partially calm the market and gives traders clarity," said Mykola Vernitsky from ProAgro consultancy.

Ukraine introduced grain export quotas in the 2007/08 season after a smaller harvest.

CAUTION

The World Bank on Monday cautioned against countries taking any action that could add to market uncertainty, in particular widespread export bans like Russia's.

It was not clear what support Ukraine would have from the World Trade Organisation, of which it is a member, for introducing quotas.

Anxiety about the possibility of export restrictions pushed customs officials to impose curbs of their own in late July, although the government insisted then that there were no grounds for limits.

The Ukrainian grain traders' union UZA said on Tuesday that exporters had suspended wheat purchases for exports because of the new customs curbs.

Analysts and traders say Ukrainian exports could fall to about 15-18 million tonnes in the 2010/11 season from 21.5 million in 2009/10 due to the smaller crop.

"We need to be able to see clearly in front of us. We don't know what is going on. The customs detain vessels and we cannot buy for future exports," a foreign trader told Reuters. "If there are quotas -- that's good."

A trade source said on Wednesday that customs officials in Ukraine had detained cargo ships with grain belonging to five traders. Grain quality was the reason given.

The customs service has confirmed the detention of one vessel with grain in the sea port of Berdyansk.

Some traders said it was likely that only milling wheat would be subject to restrictions.

"There is no reason to limit feed grain exports. We have a significant surplus of feed grain and any limit will hit farmers as they will not be able to sell grain at a good price," a Ukrainian trader told Reuters.

(Editing by Richard Balmforth and Sue Thomas)

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