Ukraine gives final approval to minimum prices for grain exports

KIEV (Reuters) – Ukraine has agreed to the final details of a new system of minimum export prices for the country's key grain and oilseed shipments, the government said on Tuesday, raising concerns among grain traders that the plan could lead to disruptions in exports and trade with the country.

The government launched the plan to address price distortions resulting from the war with Russia. As a result of the war, there was an increase in domestic cash purchases of certain agricultural products and their subsequent export at artificially low prices to avoid taxes.

The Cabinet has now approved the procedure for setting minimum prices, paving the way for their introduction. Ukrainian officials have said the new system could be introduced in August, but it is not yet clear when exactly the new rules will come into force.

The new export pricing mechanism will apply to the supply of wheat, corn, sunflower oil, soybeans, rapeseed and some other agricultural commodities, which remain Ukraine's main source of external income.

According to the new rules, the minimum permissible export prices are calculated based on the data of the State Customs Service, taking into account the delivery conditions of the previous month and applying a 10% discount.

The traders' union UGA said the minimum export prices would endanger half of Ukraine's exports, could destroy the futures contract system and lead to uncertainty in the market regarding the fulfillment of exporters' obligations and grain purchases.

It was said that many farms were using bank loans secured by forward contracts. The lack of such contracts would prevent farmers from accessing credit.

(Reporting by Pavel Polityuk; Editing by Helen Popper)