Ukraine. Mechanism of minimum grain prices will start working in practice not earlier than August

The mechanism of minimum grain prices introduced by the Verkhovna Rada to combat black exports will not start working in practice until August. This forecast was made at a meeting with market participants by Mykhailo Sokolov, a representative of the Ministry of Agrarian Policy and Food.

“I do not expect this to happen before August,” Reuters quoted Sokolov as saying.

The new mechanism envisages a ban on exports under contracts for the supply of wheat, corn, sunflower oil, soybeans, rapeseed and some other agricultural products where contract prices are below the minimum allowable prices.

According to Sokolov, the minimum prices will be calculated based on official customs data for the previous month.

“We take 5% of all contracts that were concluded at the lowest prices and calculate the average price. And the result is further discounted by 10%. Thus, this minimum calculated price will be lower than the weighted average price,” ASAP Agri quoted Sokolov as saying.

Sokolov assured that the number of deals concluded at prices lower than the calculated minimum price is very small.

“Such deals are either a really special case or some kind of abuse,” he said.

Ukrainian farmers are categorically against the proposed mechanism.

“The introduction of minimum export prices will put half of Ukraine’s exports at risk,” the Ukrainian Grain Association said in a statement.

It believes that the new mechanism will effectively destroy the system of forward contracts and deprive agricultural enterprises of bank loans secured by these contracts.

“The introduction of minimum prices for agricultural exports will have an extremely negative impact on the volume of exports from Ukraine and the financial situation of the commodity producer. In a time of war, when most of the economy is not working, this will effectively destroy the remnants of the economy, which still generates income and foreign exchange earnings with which Ukraine can finance its army,” the organization said in a statement.

Tags: export, grain, prices, soybean, oilseeds, wheat, rapeseed, restrictions, Ukraine, sunflower oil